Comex gold futures fell to a four-week low on Thursday as the Federal Reserve signalled it was on track to raise US interest rates again in December, driving the dollar to two-month highs versus other major currencies.

In a statement following its latest two-day policy meeting, the US central bank indicated it still expected one more increase by the end of the year in spite of a recent run of soft inflation readings. The Fed also said it planned to trim the $4.2 trillion in bonds and other assets that it built up in the wake of the 2008 financial crisis in a bid to kick-start growth.

Demand for gold, seen as a safe investment in uncertain times, revived earlier after US President Donald Trump pledged stronger measures against North Korea and Pyongyang promised to fight off what it said was the threat of a US invasion.

Comex gold futures are still moving in line with our expectations so far.

As mentioned in the previous update, the favoured view expects prices to edge higher again after testing key support levels. However, supports have given away and it appears more likely that prices could be edging lower.

The $1,290-95 per ounce still has the possibility of holding dips, but 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 strong rebound from those levels subsequently.

Prices could head towards our potential bearish near-term targets around $1,240-45 levels, while upside attempts could get capped at $1,315-20 in the near-term. The $1,240-45 level is a very strong medium-term support and therefore, we can expect a bounce or a retracement from those levels in the coming weeks.

Only a direct rise and close above $1,326 could hint at further bullishness ahead. The favoured view expects prices to drift towards $1,260 levels at least. It appears more likely that resistances around $1,310-15 will cap for a decline towards $1,260 levels or even lower towards $1,245 in the coming sessions.

Wave counts: It is most likely that the fall from the record $1,925 level to the recent low of $1,088 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.

Subsequent to this decline, 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. But, failure to follow-through above $1,355 has dashed any hopes of any impulsive up 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 again, 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 $1,275, 1,260 and 1,245. Resistances are at $1,315, 1,327 and 1,355.

The author is the Director of Commtrendz Research and there is risk of loss in trading.

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