Buy gold if it dips to $1,215/oz

Comex gold futures eased on Thursday as the dollar extended its biggest one-day rally in over a month, though losses were limited by a retreat in oil prices and European stocks, which supported haven interest in the metal as an alternative asset.

Comex gold futures moved higher in line with our expectations. As mentioned in the previous update, since the big picture continues to display neutral to bullish tendencies, we are hopeful that important supports could hold for a push higher again. Important support now lies at $1,210-15 per ounce levels. While supports holds attempts to decline, the chances for a break above $1,300 levels still look good.

As expected we saw good resistance around 1,265-70 levels. Presently, the technical picture seems to be mixed and prices are expected to move in a broad range of $1,210-65. But, unexpected fall below $1,210 could hint at a possible head-and-shoulder pattern break that could hint at bearishness ahead. Such a move could push prices lower towards $1,160-65 levels, which we do not favour presently.

Favoured view in the short-term still expects prices to find supports on any dips to support levels around $1,215-20 and then move higher again.

Only a direct fall below $1,208 could dash our bullish hopes, which could see prices falling further towards $1,145-50 levels, which is not our favoured view.

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 $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 $1,375 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.

As prices have broken certain important resistances and shows impulsive tendencies, we will now stick with the above count. And as mentioned earlier, once prices reach $1,025-45 levels we will look for any signs of reversal. There are signs of a turnaround, and prices need to convincingly rise above $1,300 levels and close above it.

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 on dips to $1,215 with a stop-loss of $1,204 targeting $1,245 followed by $1,265.

Supports are at $1,215, 1,195 and 1,165. Resistances are at $1,245, 1,275 and 1,320.

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

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