Comex gold futures were sharply higher on Thursday, following minutes of the Federal Reserve’s June meeting, which gave no sign about the timing of any interest rate rise. Gold extended earlier gains after European shares drifted lower on weak economic data from Italy and on mounting concern about the financial health of Portugal’s largest listed bank resulting in risk aversion and haven buying of gold. Gold had come under pressure after last week’s strong US jobs report stoked speculation of an early hike in rates. Higher interest rates would encourage investors to switch to risky assets like stocks and fixed income that, unlike gold, pay dividend and interest respectively. But at the minutes from the June 17-18 Federal Reserve meeting, there was little to suggest any move forward towards an interest rate increase, currently expected in the middle of next year. However, the Fed indicated it would end its asset purchases in October.
Comex gold futures are perfectly higher in line with our expectations. As mentioned in the previous update, though the underlying trend remains bearish, prices are hinting at a possible bullish reversal. Also, while the $1,285-1,300 zone holds attempts to decline, we expected prices to eventually breakout above the key resistance at $1,335/38 then targeting $1,355 or even higher. Dips to $1,325-35 remains supportive now. Ideal target in the short-term is at $1,365/67 with a possibility even to extend towards $1,390-1,400 levels. Only a fall below $1,310/ounce could forces us to abandon our bullish view.
The wave counts have been modified once again. From the peak of $1,920 a corrective decline in the form of “A-B-C” is already over at $1,181 and a new impulse has begun. Confirmation of such an impulse will be seen above $1,445. Fall below $1,250 could now force us to abandon this scenario and look at a bearish one targeting $1,095.
RSI is in the overbought zone now indicating a possible correction in the offing. The averages in MACD have gone above the zero line of the indicator hinting at a bullish reversal. Only a cross over below the zero line again could hint at bearishness again.
Therefore, look to buy gold on dips to $1,325-30 zone with a stop loss at $1,308 targeting $1,355 followed by $1,367.
Supports are at $1,335, 1,315 and 1,285 and Resistances are at $1,355, 1,367 and 1,395.