Commodities

Sell gold at $1,290-95/oz

Gnanasekaar T | Updated on January 16, 2018 Published on October 20, 2016

Comex gold futures edged up on a weaker dollar with the focus shifting to the European Central Bank policy later in the day. The ECB is set to keep rates unchanged. Currently, a mildly weaker dollar seems to be giving gold a breather, but any reversal could pressure gold prices.

Comex gold futures moved against our expectations. As mentioned earlier, since the price has broken the key support at $1,295-1,305 an ounce, this will tend to cap any upside attempts again. Also, as illustrated earlier, the big picture is still looking firm, which gives a feeling that $1,245-50 could hold attempts to decline. A bounce from there looks likely.

A strong intermediate resistance lies around $1,278-85 followed by a stronger one at $1,295-1,305. Only a fall below $1,250 could revive bearish hopes for $1,208-10 levels. The favoured view expects prices to test resistance around $1,295-1,305, while supports around $1,245-50 holds for the week. But subsequently, we expect prices to dip again. Only a direct rise above $1,320 on high volumes on a closing basis could revive bullish hopes. Such a rise will hint that the downward correction has ended and the rally above $1,400 levels has begun.

Wave counts: It is most likely that the fall from the record $1,925 to the recent low of $1,088, was either a possible corrective wave ‘A’, with a possibility to even extend towards $1,025-30 levels or a complete correction of A-B-C ending with this decline. Subsequent 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 levels. 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.

Once prices reach $1,025-45 we will look for a reversal.

RSI is in the neutral zone now, indicating that it is neither oversold nor overbought. The MACD averages are still below the zero line of the indicator, suggesting a bearish reversal. Only a crossover again above the zero line could hint at a reversal.

Therefore, sell Comex gold on rallies to $1,290-95 with stop-loss at $1,311 targeting $1,245, followed by $1,210.

Supports are at $1,250, 1,210 and 1,170. Resistances are at $1,285, 1,305 and 1,330.

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

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Published on October 20, 2016
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