Sell gold if it touches $1,204/oz

August 16, 2018

London (Aug 16)  Comex gold futures clawed back from a 19-month low on Thursday on short-covering and as the US dollar softened following news that Beijing will hold trade talks with Washington late this month.

Comex gold futures moved against our expectations. The critical support at $1,180 per ounce has been broken denting any hopes of a intermediate bottom that we had envisaged close to $1,195.

Strong resistance will be noted around $1,205 going forward. We expect a retracement or a strong pullback to resistance levels, but subsequently prices can once again edge lower towards $1,120-25 levels being a potential target area. As we have been maintaining for a while, the medium-term picture still holds some promise, therefore caution should be exercised on getting excessively bearish too. From the bottom at $1,045 in December 2015, prices have been making highs so far , a clear sign of a rising trend, which has made us believe the bigger picture to be supportive despite strong corrective declines from time to time. A positive trigger for the medium-term in sustaining the uptrend is likely to be above a close of $ 1,275 levels. In the short-term, we expect prices to be in the $1,145-1,275 range or even extend to $1,120-25 where good supports can be seen again.

Only a close above $1,275 in the bigger picture could revive bullish hopes once again for $1,335 or even higher.We expect prices to stabilise and reverse higher from there towards $1,205-or even higher to $1,242.

Wave counts: It is most likely that the fall from 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. An eventual break above $1,355 could see the Wave “B” scenario emerge in the coming sessions. While $1,270 holds, we still favour prices rising higher towards $1,450-75 in the form of wave “B”. We will re-assess around $1,450-70 levels on the potential for a wave “C” decline subsequently.

RSI is in the oversold zone hinting at a upward correction in the offing before more declines can be seen.

The averages in MACD are 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 bearish reversal in trend.

Therefore, sell Comex gold around $1,197-1,204 with stop loss at $1,215 targeting $1,145 followed by $1,125.

Supports are at $1,160, 1,145 and 1,125. Resistances are at $1,195, 1,205 and 1,242.


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