Gnanasekaar T

Buy gold if it dips to $1,225/oz

Gnanasekaar T | Updated on October 16, 2014 Published on October 16, 2014


Stop loss: $1,209; target: $1,265

Comex gold futures were higher on Thursday, near its highest in over a month, with investors seeking safety amid increasing concerns over a slump in the global economy. Sluggish US data could prompt the Federal Reserve to delay a hike in interest rates, a potential boost for gold. Physical demand, which usually provides a floor for prices, also seemed to have picked up lately with the recent price gains. The fourth quarter is typically a strong period for gold demand in major buyers China and India due to festivals and an increase in weddings.

Comex gold futures moved against our expectations. As cautioned in the previous update, it looks unlikely for a sharp fall immediately. Though, prices have seen a smart rebound there is still no clear indication of any reversal in trend so far. Only a close above $1,252 an ounce could cause doubts on our bearish view.

Such a rise could take prices higher towards $1,268-75 levels, where it can find strong resistance again. The weekly picture still shows incredible weakness and the present up move could prove to be a corrective rebound within a larger downtrend. A close below $1,210 should open the downside again for a break below $1,180 and a subsequent move lower towards $1,050 levels in the coming months.

Short-term picture indicates the present upward correction to continue to stretch higher to $1,265-75 levels while $1,225 holds. Subsequently, the decline should resume.

Fall below $1,250 has forced us to abandon any bullish hopes and look at a bearish one targeting $1,050. We feel the present set of moves from $1,175 to $1,435 is a corrective wave four in an impulse which began from the high of $1,920, with an equality target at $1,020. Ideally, from this area, a pullback higher towards $1,300 looks likely. RSI is in the neutral zone now indicating that it is neither oversold nor overbought.

The averages in MACD are still below the zero line of the indicator indicating a bearish reversal. Only a cross over again above the zero line could hint at a possible bullish reversal again.

Therefore, look to sell gold to buy on dips to $1,225 at a stop-loss of $1,209 targeting $1,265.

Supports are at $1,225, 1,210 and 1,175 and Resistances are at $1,265, 1,277 and 1,300.

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

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Published on October 16, 2014
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