Comex gold futures were higher on Thursday as strong inflows into gold-backed funds increased optimism the metal could extend this year’s rally despite a revival in risk appetite that lifted Asian equities to a two-month high. Comex gold futures moved perfectly in line with our expectations. As mentioned in the previous update, the technical picture is turning friendly for gold and a possible trend reversal is in the making, as prices have crossed certain important levels. Prices have hit a high of $1,260 an ounce so far and a sharp correction from there has seen prices finding support near $1,200 levels. As mentioned before, if prices can take a breather and consolidate for sometime, chances are good for a test of crucial resistance around $1,375 levels in the coming months. View remains the same in the coming week as well. Any corrective dip is expected to find support at $1,200-05 levels followed by $1,185 levels now. Since, the trend is showing positive signs, we would like to believe that, after the consolidation in a broad range between $1,200-1,245, the upside momentum should resume. Only a fall below $1,165 could cause doubts on our bullish expectations. Such a fall though not expected, could see prices weakening towards $1,120-25 levels. Favoured view expects supports to hold and prices to edge higher again towards recent highs.

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 record 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 $1,025-30 levels or a complete correction of A-B-C ending with this decline. Subsequently, to this decline, a corrective wave “B” could unfold with targets near $1,255 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. As prices have broken the key $1,140, we will now abandon this count. And as mentioned earlier, once prices reach $1,025-45 levels we will look for any signs of reversal. As of now there seems to be no major signs of turnaround, but momentum favours a short-term rally towards $1,350 levels.

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

Therefore, buy Comex gold near $1,220 with a stop-loss of $1,198 targeting $1,260 followed by $1,285.

Supports are at $1,220, 1,200 and 1,185. Resistances are at $1,245, 1,260 and 1,305.

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

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