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Comex gold futures were lower on Thursday after comments from Federal Reserve officials suggested that a rate increase in June remained on the cards despite recent weak data.
A US interest rate increase, which would be the first in nearly a decade, dampens the appeal of zero-yielding assets such as gold.
Comex gold futures moved perfectly higher in line with our expectations. As mentioned earlier, a successful attempt to close above $1,225 per ounce could take prices further higher towards important resistance levels near $1,245. This has, however, not materialised and as such lead to exhaustion in the current up move. Very strong support is seen near $ 1,175-80 levels.
A decline below $1,170 could revive bearish expectations again. Such a move could take prices lower again towards $1,141 or even lower to $1,100.
Only a move above $1,255 could take prices higher once again towards $1,245-55 levels or even higher. Favoured view now expects prices to cap at resistance levels and then decline.
The wave counts need to be altered as prices move, but the overall trend looks weak and at present levels makes it difficult to take any directional call decisively. So, for now, we will stick to our previous assessment.
It is most likely that the fall from the record $1,925 to the recent low of $1,130 was either a corrective wave “A” and a wave “B” is in progress with targets near $1,435 or even higher.
It is also possible that the entire corrective A-B-C got over and a new impulse is in progress targeting $1,527-30 or even higher in the medium-term.
If prices do cross -over above $1,435, then we can settle for the latter.
RSI is in the neutral zone now indicating that it is neither overbought nor oversold. The averages in MACD are still below the zero line of the indicator, indicating bearishness to be intact. Only a cross over again above the zero line could hint at a bullish reversal.
Therefore, sell Comex gold on rallies to $1,210-15 with a stop-loss of $1,229 targeting $1,175 initially followed by $1,145.
Supports are at $1,190, 1,175 and 1,145. Resistances are at $1,225, 1,245 and 1,285.
The writer is the Director of Commtrendz Research. There is risk of loss in trading.
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