Sell gold if it touches $1,260-65/oz

The Hindu Business Line - - COMMODITIES - GNANASEKAAR T

Comex gold fu­tures slid to a four­month low on Thurs­day as a bounce in the dol­lar sparked by op­ti­mism over US tax re­form plans pushed the metal out of its re­cent nar­row trad­ing range.

Traders are now await­ing fur­ther di­rec­tion from US non-farm pay­rolls data later this week. Next week the Fed­eral Re­serve is also ex­pected to an­nounce an­other US in­ter­est rate hike, and to guide on the pace of fur­ther in­creases.

Comex gold fu­tures have bro­ken key sup­ports push­ing it lower. As men­tioned ear­lier, there was a lot of chop­pi­ness and it typ­i­cally tends to hap­pen be­fore a trend­ing move be­gins and in this case most likely a down move.

The breach­ing of the $1,260 per ounce level opens the pos­si­bil­ity of fur­ther slide.

Prices could grind ini­tially lower to $1,245-50. Strong ini­tial re­sis­tances are around $1,267 fol­lowed by $1,275/77. Only a close above $1,280 could sud­denly open the upside again to $1,33035 lev­els.

Di­rect fall be­low $1,240, on the other hand, could re­vive bear­ish ex­pec­ta­tions for $1,206/10 lev­els in the com­ing ses­sions. We still feel the $1,240 level to be sup­port­ive in the near-term.

The $1,240-45 is a very strong medium-term sup­port and there­fore, we can ex­pect a strong bounce or a re­trace­ment from that level in the com­ing weeks. Failure to hold there can ac­cel­er­ate the fall in gold prices.

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 $1,02530 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 ex- pect 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. But a sus­tained move above $1200 has once again re­vived bullish hopes and will make the nec­es­sary ad­just­ments to the wave counts, as the prices break key re­sis­tance above.

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 again, in­di­cat­ing a bear­ish re­ver­sal. Only a cross over again above the zero line could hint at a re­ver­sal in trend to bullish.

There­fore, sell Comex gold around $1,260-65 with the sto­ploss at $1,278 tar­get­ing $1,240 fol­lowed by $1,210.

Sup­ports are at $1240, 1,225 and 1,206. Re­sis­tances are at $1267, 1,278 and 1,297.

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

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