Gold & Silver

Sell Comex gold futures at $1,251-1,255

| Updated on: May 04, 2017
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Comex gold futures tumbled to six-week lows on Thursday, under pressure from a strengthening dollar on expectations of further US rate rises this year and receding political uncertainty in Europe.

The dollar strengthened after the US Federal Reserve played down any threats to this year’s planned hikes in interest rates, supporting forecasts of another move in June.

Expectations that centrist Emmanuel Macron will win the French presidential election on Sunday were reinforced after a TV debate with the far-right's Marine Le Pen.

The focus is now shifting to Friday's US non-farm payrolls report for April, which could reinforce perceptions of higher US interest rates in June.

Comex gold futures moved lower against our expectations. As mentioned earlier, a broad consolidation is under way and prices are moving with a mild bearish bias presently and an unexpected dip below $1,255 might hint at the possibility of failure of the bullish view.

A break below this near-term support has dented the bullish picture and will act as a strong resistance going forward. Next supports are near $1,220-25 followed by $1,210. A very important rising trendline support at $1236 has broken, opening the way for further declines.

Any upticks to $1,251-55 are expected to cap upside attempts. The favoured view expects prices to edge lower now towards $1,205-10 levels.

Wave counts

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 all-time highs at $1925 to the recent low of $1088 so far, was either a possible corrective wave A, with a possibility to even extend towards $1025-30 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.

But, failure to follow-through above $1,355 has dashed any hopes of any impulsive up move.

As the price has broken certain important supports and shows weakness targeting $975 levels, we are tilted towards looking at this as a corrective wave C in progress.

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 crossover again above the zero line could hint at a reversal in trend to bullishness.

Therefore, sell Comex gold at $1,251-55 with a stop-loss at $1,262 targeting $1,220 followed by $1,205. Supports are at $1,225, $1,205 & $ 1,195 and resistances are at $1,255, 1,272 and 1,295.

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

Published on January 11, 2018

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