Sell gold if it touches $1,220-25/oz

Comex gold futures edged higher on Thursday as the dollar touched a two-week low and investors awaited US labour data to assess whether this will boost the prospect of an early interest rate rise by the Federal Reserve. Comex gold futures moved as expected.

As mentioned in the previous update, price could not sustain above $1,300 denting the confidence of the bulls. The weekly price structure still looks healthy for the uptrend to gain momentum despite the current weakness. The chart picture has not shown any major bearish indications and it still looks more like a healthy correction within a sustained bullish trend.

As mentioned earlier, an unexpected fall below $1,224 could hint could hint at bearishness ahead. Such a move could push prices lower towards $1,200-05 levels now. After testing $1,199, prices have bounced back and the pullback could further extend even to $1,220-25 levels before drifting lower towards near-term targets around $1,175 levels.

Though the momentum is strongly bearish in the near-term, we favour prices to test important supports and push higher again. Favoured view in the short-term still expects prices to be capped around $1,220-25 and then edge lower towards important supports again. Only a direct rise above $1,237 could cause doubts on our short-term bearish view, which could then see prices pushing higher towards $1,255 levels.

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. 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, which has not happened so far.

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 cross over again above the zero line could hint at a reversal in trend to bullish.

Therefore, sell Comex gold on rallies to $1,220-25 with a stop-loss of $1,237 targeting $1,185.

Supports are at $1,205, 1,175 and 1,145 and Resistances are at $1,225, 1,255 and 1,285.

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

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