Comex gold futures ended lower on Thursday, close to a 5-1/2-year low hit last week, as the dollar jumped after the Federal Reserve left the door open for a rate rise in September and ahead of US GDP data.
Comex gold futures are moving perfectly in line with our expectations. As mentioned earlier, resistances will be seen at $1,115-20 an ounce levels and pullbacks to the above mentioned levels could come under pressure and prices could eventually retest the lows at $1,085 levels or even lower to $1,045.
Even now the question is, can prices reverse from above mentioned levels? Technically, an equality target is seen at $1,020-25 and another important one comes at $925. However, it does not mean that the above mentioned equality targets might necessarily be tested.
Our favoured view expects the confluence point near $1,025-45 range to hold any attempts to decline and the prices moving up in a correction from there. Trigger for the decline will be on a break below $1,076 now. However, only a convincing close above $1,145 accompanied by rising volumes could turn the picture to neutral again.
Also, a break above the near-term resistance at $1,110 could likely se a minor pullback towards $1,125-26 levels and therefore need to watch the levels closely in the coming sessions.
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 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.
We are more inclined to go with this as a favoured scenario. If prices do cross-over above $1,435, then this possibility will be confirmed. In the short-term though, prices are likely to be under pressure and could edge lower towards $1,025-45 levels.
RSI is in the oversold zone now indicating a possible upward correction in the offing. The averages in MACD are below the zero line of the indicator, indicating a bearish reversal in trend again. Only a cross over again above the zero line could hint at a bullish reversal.
Therefore, sell Comex gold on rallies to $1,097 with a stop-loss of $1,112 targeting $1,045 followed by $1,020.
Supports are at $1,078, 1,045 and 1,020. Resistances are at $1,110, 1,125 and 1,160.
The author is the Director of Commtrendz Research. There is risk of loss in trading.