Buy gold on dips to $1,305-10/oz

Comex gold futures ended at a four-week low, but prices were range-bound ahead of a speech by Federal Reserve Chair Janet Yellen this week which will be watched for clues on monetary policy. Holdings of the largest gold-backed exchange-traded-fund (ETF), New York’s SPDR Gold Trust and the largest silver-backed ETF, New York’s iShares Silver, have remained unchanged.

Comex gold futures moved against our expectations. As mentioned earlier, while $1,330 an ounce holds, we can expect prices to edge higher again. It has broken this support and now headed towards another important support near $1,305-10 levels. Prices are expected to move with a negative bias, but the picture for gold has presently turned trendless. A potential target lies around $1,450-55 levels, being an equality target in the coming months. Initial resistance is seen at $1,365-75 levels now. Once above here, prices could push higher further towards $1,400 levels or even higher in the coming sessions. Only an unexpected fall below $1,305 could postpone the bullishness and such a fall could see prices testing $1,290-95 levels being a strong trend line support level. Below here, it could further become bearish for $1,255, which is not our favoured view. Failure to hold support at $1290-95 could clearly dent the prospects of the uptrend. Favoured view still expects prices to be find support around the $1,305-10 levels and then edge higher again.

Wave counts : 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 convincingly risen in volumes and closed above $1,300 levels, which further reaffirms our wave count. RSI is in the neutral zone now indicating a that it is neither overbought nor oversold. The averages in MACD are 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 $1,305-10 with stop-loss at $1,290 targeting $1,340 followed by 1,375.

Supports are at $1,305, 1,295 and 1,255 and Resistances are at $1,340, 1,365 and 1,400.

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

COMMENT NOW