Feb Gold Set Up For Breakout to $1881.90

Gold futures rallied on Wednesday as data showing U.S. consumer inflation fell within estimates, denting the investment appeal of the U.S. Dollar and fueling speculative buying from investors who seemed to have priced in the Federal Reserve’s likely interest rate hike timetable.

On Wednesday, February Comex gold futures settled at $1827.30, up $8.80 or +0.48%. The SPDR Gold Shares ETF (GLD) finished at $170.70, up $0.41 or +0.24%.

The U.S. Dollar hit a two-month low after data showed U.S. inflation posted its largest annual rise in nearly four decades, making dollar-denominated gold more attractive to foreign buyers. The December consumer price index increased 7%, according to the Bureau of Labor Statistics.

Gold was also boosted by a drop in Treasury yields. The yield on the benchmark 10-year Treasury note fell by 1 basis point to 1.734%. This is down from slightly over 1.80% earlier in the week. This indicates the jump in inflation may have been priced into the bond markets.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum has been trending higher since the formation to the closing price reversal bottom on January 7.

A trade through $1833.00 will change the main trend to up. A move through $1781.30 will negate the closing price reversal bottom and signal a resumption of the uptrend.

The minor trend is down. A trade through $1830.70 will change the minor trend to up. This will confirm the shift in momentum.

The short-term range is $1881.90 to $1753.00. The market is currently testing its retracement zone at $1817.50 to $1832.70. This zone is controlling the near-term direction of the gold market.

A pair of 50% levels at $1807.20 and $1793.00 are potential support levels.

The longer-term support is the retracement zone at $1781.00 to $1757.10.

Daily Swing Chart Technical Forecast

The direction of the February Comex gold futures contract on Thursday is likely to be determined by trader reaction to $1825.10.

Bullish Scenario

A sustained move over $1825.10 will indicate the presence of buyers. This could trigger a surge into a resistance cluster at $1830.70, $1832.70 and $1833.00.

Taking out $1833.00 will not only change the main trend to up, but it could trigger an acceleration to the upside. The daily chart indicates there is plenty of room to the upside over this level with the November 16 main top at $1881.90 the next major target.

Bearish Scenario

A sustained move under $1825.10 will signal the presence of sellers. This could trigger a further break into the 50% level at $1817.50.

Taking out $1817.50 will indicate the selling pressure is getting stronger with $1807.20 the next likely target.