Comex gold futures were closer to a five-month low, hit in the previous session, as the dollar pared losses against the major currencies and traded within sight of its 2018-peak. Also weighing on gold were surging US bond yields, political uncertainty arising out of North Korea and a weaker euro.

Comex gold futures moved against our expectations. As mentioned in the previous update, failure to follow-through higher above $1,325 an ounce levels could once again dent the confidence of the bulls leading to bigger fall subsequently. The overall picture still hints at bullishness ahead, while crucial supports hold at $1,278 levels.

A positive trigger for the medium-term in sustaining the uptrend is likely to be above a close of $1,375. In the coming week, we expect prices to gradually edge lower to $1,278 and failure to hold here could drag prices even lower to $1,255-60. After the break of $1,301-05, the trend in the near-term is shaky and this zone could potentially cap upside attempts in the week ahead. The favoured view expects prices to edge lower to $1,278 followed by $1,255 levels followed by a strong upward reversal.

Wave counts

It is most likely that the fall from record $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 $1,025-30 levels or a complete correction of A-B-C ending with this decline. Subsequently, 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. An eventual break above $1,355 could see the wave “B” scenario emerge in the coming sessions.

While $1,270 holds, we still favour prices rising higher towards $1,450-75 in the form of wave “B”. We will re-assess around $1,450-70 levels on the potential for a wave “C” decline subsequently. 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 bearish reversal in trend.

Therefore, sell Comex gold on rallies to $1,305-10 with the stop-loss at $1,324 targeting $1,278 followed by $1,255.

Supports are at $1,278, 1,260 and 1,245. Resistances are at $1,305, 1,325 and 1,355.

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

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