Commodity Calls

Sell gold if it rallies to $1,315/oz

Gnanasekaar T | Updated on March 09, 2018 Published on September 28, 2017

gold-coins

Comex gold futures touched a 6-week low after the dollar and US bond yields rose on proposed US tax reforms and strong economic data that supported the case for another US interest rate hike this year.

However, speculative fund investors were sticking with gold and demand was underpinned by geopolitical worries over North Korea’s nuclear programme and an independence vote in Kurdistan.

Comex gold futures moved perfectly in line with our expectations so far.

Though $1,290-95 an ounce still has the possibility of holding dips, a close below this level could open the downside to $1,273 followed by $1,260 levels in the near-term.

It needs to be seen if there is a possibility of a rebound from those levels subsequently. The momentum is strong on the downside and any upticks could be short-lived.

Prices could head towards our potential bearish near-term targets around $1,240-45, while upside attempts gets capped around $1,295-97 in the near-term.

The $1,240-45 level is a very strong medium-term support and therefore, we can expect a strong bounce or a retracement from those levels in the coming weeks. Only a direct rise and close above $1,315 could hint at further bullishness ahead.

The favoured view expects prices to drift towards $1,260. But it appears that resistances around $1,290-95 will cap a decline towards $1,260 or even towards $1,245 in coming sessions.

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. 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.



Corrective wave in progress

But, failure to follow through above $1,355 has dashed any hopes of any impulsive upward move. As prices have broken certain important supports and shown weakness targeting $975 levels, we are tilted towards looking at this as a corrective wave C in progress.

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, indicating a bullish reversal. Only a crossover again below the zero line could hint at a reversal in trend to bullishness.

Therefore, sell Comex gold on rallies to $1,315 with a stop-loss at $1,328 targeting $1,260 followed by $1,245.

Supports are at $1274, 1,260 and 1,245. Resistances are at $1,295, 1,315 and 1,327.

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

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Published on September 28, 2017
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