TECHNICAL ANALYSIS. Buy gold at $1,300-05/oz

Comex gold futures edged down on Thursday as the equity and currency markets showed signs of stabilising, but the metal remained on track for its biggest monthly rise since February in the wake of last week’s vote on Britain’s membership of the European Union.

Comex gold futures moved perfectly in line with our expectations. As mentioned earlier, the weekly price structures still look healthy for the uptrend to gain momentum, and we favoured prices to test important supports and push higher again. We saw a spectacular week of price movements in line with our overall bullish view.

Prices are consolidating in the $1,300-25 an ounce levels presently. We expect a break higher in the range and a test of $1,345-55 looking likely in the coming days followed by $1,378-85 levels where some resistance can be noted.

A fall below $1,294 could postpone the bullishness and such a fall could see prices testing $1,275 levels and then edging higher from there again.

The favoured view still expects prices to find support around $1,300-05 levels and then edge higher towards important resistances around $1,345-50 followed by $1,380 levels. A potential medium-term equality target for gold futures comes at $1,455-85, and while supports hold, the chances are bright for a push higher towards the abovementioned 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.

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 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.

As prices have broken certain important resistances and show impulsive tendencies, we will now stick with the above count. And as mentioned earlier, once prices reach $1,025-45 levels we will look for signs of reversal. There are signs of a turnaround, and prices have convincingly risen in volumes and closed above $1,300 levels, which further reaffirms our wave count.

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 the trend to bearishness.

Therefore, buy Comex gold on dips to $1,300-05 with stop-loss at $1,271 targeting $1,355 followed by $1,380.

Supports are at $1,245, 1,235 and 1,210 and Resistances are at $1,276, 1,295 and 1,345.

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

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