Comex gold futures rose on Thursday as the dollar drifted from one-month highs in the previous session on upbeat US economic data that boosted the prospect of a rate hike by the Federal Reserve next month.

Comex gold futures moved perfectly in line with our expectations. Prices broke out of the $1,215-20 band and from there it has been acting as a strong support, and taking out the near-term highs at $1,220, has increased the chances of this price rally to extend to the next resistance at $1,235-40.

Prices have hit $1,216 and bounced off from there, and it looks like this trend could continue towards $1,260-65 in the coming sessions.

A daily close above $1,225 could again revive bullish hopes and such a rise would hint that the downward correction has ended. One should be ready to abandon the bearish view if prices close above $1,225. With the dollar still looking weak, the favoured view now expects support in the $1,225-30 zone to hold dips if any. Though the $1,240-45 zone is a strong one to cross in the near-term, chances exist for an extension even to $1,265-75 eventually.

Supports are seen at $1,220 followed by $1,205-10 now. We still maintain our broader bullish view of gold in the long-term. And the current fall to recent lows could once again be an opportunity to do some bottom picking in 2017.

The favoured view expects prices to initially edge higher towards the resistance point mentioned above. Only an unexpected fall below $1,190 could hint at weakness once again.

Wave counts: It is most likely that the fall from the record $1,925 to the recent low of $1,088, was either a 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. 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’.

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

Therefore, buy Comex gold around $1,225-30 with stop-loss at $1,214 targeting $1,260 followed by $1,278. Supports are at $1,225, $1,210 & $1,185 and Resistances are at $1,255, 1,278 & 1,310.

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

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