Comex gold futures edged up on Thursday supported by strong physical demand amid a firm dollar, with markets awaiting more direction on a rate hike from the US Federal Reserve. Gold is expected to gain over the next few days on account of festival buying in India, the world’s second-largest consumer of bullion.

Comex gold futures are moving in line with our expectations. As mentioned earlier, since the price has broken the key support around $1,295-1,305 per ounce, this will tend to cap any upside attempts again. And, as expected, prices bounced off from the $1,245-50 level.

Short-term strength could see prices rise, but intermediate resistance at $1,278-85 and a stronger one at $1,295-1,305 is likely. Only a fall below $1,255 could revive bearish hopes for $1,208-10 subsequently. We are still hopeful of a recovery towards $1,295-1,300.

The favoured view now expects prices to test resistance around the $1,295-1,305 zone while supports around $1,245-50 hold for the week. But subsequently, we expect prices to edge lower again.

Only a direct rise above $1,320 in high volumes on a closing basis could revive bullish hopes and such a rise will hint that the downward correction has ended and the rally above $1,400 has begun.

Wave counts: It is most likely that the fall from the record $1,925 to the recent low of $1,088 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. 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 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 shown impulsive tendencies, we will now stick with the above count.

Once prices reach $1,025-45 we will look for any reversal. There are signs of a turnaround, and prices have convincingly risen in volumes and closed above $1,300, which reaffirms our wave count.

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

Therefore, sell Comex gold on rallies to $1,290-95 with stop-loss at $1,311 targeting $1,245, followed by 1,210. Supports are at $1,255, 1,240 and 1,210. Resistances are at $1,285, 1,305 and 1,330.

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

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