Sell Comex gold on rallies to $1,258-60/oz

Comex gold futures edged higher on Thursday, as the US dollar weakened against other currencies on bets that central banks in Europe were preparing to scale back monetary stimulus, but the bullion's gains were capped by a surge in equities.

Comex gold futures are moving in line with our expectations so far. Prices found support in the $1,236 and pushed higher again. As mentioned earlier, the technical picture is turning neutral to bearish in the short-term and support levels around $1,231 followed by $1,210 are expected to be tested in the coming sessions. Strong resistance will be seen at $1,258-60 again now. Current indications hint at a pullback higher towards $1,260 initially with chances of extending higher to $1,275 region too. Failure to close above $1,280 could lead to loss of confidence for gold. Such a move could see prices testing $1,231-33 again, an important trend line support level that could become a potential near-term target. Chances exist for an extension even to $1,195 l, or even lower to $1,177 a potential target area in the coming months. Unexpected rise and close above $1,265 could cause doubts on our bearish expectations. Favoured view expects prices to edge lower towards supports mentioned above. The trigger for such a decline below $1,240 could hint at a resumption of the downtrend. The bullish view we have been having so far seems to be slowly diminishing and it appears now that more downside can be expected.

We will take a look at the wave counts now and understand the possible scenarios that can unfold going forward. It is most likely that the fall from the all-time highs at $1,925 to the recent low of $1,088 so far, was either a possible corrective wave "A", with a possibility to even extend towards $1,025-30or a complete correction of A-B-C ending with this decline. Subsequently, to this decline, a corrective wave "B" could unfold with targets near $1,375 or even higher. After that, a wave "C" could begin lower again. Alternatively, we can also expect wave "B" to extend to $1,476 . If the current decline as a whole from $1,920 can be considered as a fourth wave, then the fifth wave could begin and cross $1,700 in the long-term. But, failure to follow-through above $1,355 has dashed any hopes of any impulsive up move. As prices have broken certain important supports and shows weakness targeting $975 , we are tilted towards looking at this as a corrective wave "C" in progress. RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD have gone below the zero line of the indicator again, indicating a bearish reversal. Only a cross over again above the zero line could hint at a reversal in trend to bearish.

Therefore, Sell Comex gold on rallies to $1,258-60 with stop loss at $1,276 targeting $1,235 followed by $1,220.

Supports are at $1,235, $1,220 & $ 1,210 and Resistances are at $1,260, 1,275 & 1,295.

The writer is the Director of Commtrendz Research. There is risk of loss in trading .

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