Comex gold futures are were lower on Thursday, edging further away from a 15-month peak as the dollar rebounded on optimism that the US economy could bounce back after nearly stalling in the first quarter.

The precious metal has risen 21 per cent this year as expectations of the Fed pushing ahead with interest rate hikes faded. Since gold is largely dependent on the dollar for direction, Friday’s payroll report will be critical for bullion. A soft employment number could see gold prices rallying higher again, while a stronger number could help in a dollar recovery and dent the bullion rally.

Comex gold futures are moving in line with expectations. As mentioned in the previous update, chances for a break above $1,300 levels still look good.

A daily close above $1,300 should now open the way for potential targets around $1,351 followed by $1,378 levels now. As illustrated earlier, prices need to break out of the broad range on the upside to keep the bullish expectations intact. While $1,260-65 holds attempts to decline, we expect prices to edge higher again above $1,300.

However, an unexpected fall below $1,263 could hint at bearishness. Such a move could push prices lower towards $1,125 levels, which we do not favour presently. Favoured view in the short-term still expects prices to find supports on any dips to around $1,260-65 and then move higher again. Only a direct fall below $1,260 could dash our bullish hopes. We will take a look at the wave counts now. It is most likely that the fall from the all-time high 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.

Subsequently, 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 shows impulsive tendencies, we will now stick with the above count.

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 need to convincingly rise above $1,300 levels and close above it. RSI is in neutral zone indicating it is neither overbought nor oversold. Averages in MACD are still above the zero line of the indicator again, indicating a bullish reversal. Only a cross over below zero line could hint at a trend reversal to bearish.

Therefore, Buy Comex gold on dips to $1,270-75; stop loss $1,260 targeting $1,325, followed by $1,345.

Supports are at $1,265; $1,245; $1,225; and Resistances at $1,300; $1,325 and $1,357.

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

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