Comex gold futures were higher on Thursday as investors bet that the Federal Reserve could find it hard to hike US interest rates this year, while haven demand amid a tumble in equities and the dollar also boosted the metal. Comex gold futures moved perfectly in line with our expectations.

As mentioned in the previous update, the technical picture is turning friendly for gold and a possible trend reversal is in the making, as prices have crossed certain important levels. The medium-term picture has also turned bullish now allowing for prices to edge higher further. Prices have hit a high of $1,241 an ounce so far and looks a bit stretched. It is also testing a very strong falling trend line resistance point around $1,240-48 levels.

Ideally 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. Any corrective dip is expected to find support at $1,215-20 levels followed by $1,165-75 levels now. Extreme overbought conditions at present warn of possible correction lower to levels mentioned above. Ideally, after the correction, the upside momentum should resume, but failure to cross near-term resistances at $1,245-55 levels could see deeper corrections to $1,145 or even lower to $1,120 levels.

Wave counts: It is most likely that the fall from the record 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. Subsequently, to this decline, a corrective wave “B” could unfold with targets near $1,255 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 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. As of now there seems to be no major signs of turnaround, but momentum favours a short-term rally towards $1,250 levels.

RSI is in the highly overbought zone now indicating a possible correction in the offing. The averages in MACD are 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 near $1,185-90 with a stop-loss of $1,170 targeting $1,245.

Supports are at $1,210, 1,165 and 1,145 and Resistances are at $1,250, 1,285 and 1,305.

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

comment COMMENT NOW