Comex gold futures climbed on Thursday, extending a 2.5 per cent rally made in the previous session after the Federal Reserve cut the number of interest rate rises it forecasts for this year, sending the dollar sharply lower. Comex gold futures moved perfectly in line with our expectations.

As mentioned in the previous update, if prices can take a breather and consolidate for sometime, chances are good for a test of crucial resistance around $1,375 levels in the coming months.

We saw prices correcting lower, but the bounce has been impressive and hints at further bullishness ahead. Any corrective dip is expected to find support at $1,235-40 levels followed by $1,225 levels now.

Ideally, prices could once again hover in the $1,225-1,275 range before breaking out higher towards $1,350-75 levels. Good resistance is noted near $1,275-80 levels. Since the trend is still showing positive signs, we would like to believe that after consolidation gets over, the upside momentum should resume.

Wave counts Only a fall below $1,224 could cause doubts on our bullish expectations. Such a fall, though not expected, could see prices weakening towards $1,190 levels. Favoured view expects supports to hold and prices to edge higher again towards recent highs.

We will take a look at the wave counts now and understand the possible scenarios that can unfold going forward. It is most likely that the fall from the all-time highs at $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.

A corrective wave “B” could unfold with targets near $1,255 or higher. After that, a wave “C” could begin lower again. Alternatively, we can also expect wave “B” to extend to $1,476 levels.

Fifth wave 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. As prices have broken the key $1,140, we will now abandon this count.

And as mentioned earlier, once prices reach $1,025-45 levels we will look for any signs of reversal. RSI is in the neutral zone now, indicating that it is neither overbought nor oversold. The averages in MACD are still above the zero line of the indicator again, indicating a bullish reversal. Only a cross over again below the zero line could hint at a reversal in trend to bearish.

Therefore, Buy Comex gold above $1,284 stop loss $1,270 targeting $1,325 followed by $1,350.

Supports are at $1,255 $1,225 & $ 1,190 and Resistances are at $1,285, 1,325 & 1,375.

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

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