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James Hyerczyk
Comex Gold and US Dollar

Gold futures weakened on Tuesday, pressured by a strong U.S. Dollar that hit its highest level against a basket of currencies since May 31. The greenback was supported by a lower Euro and British Pound.

The news that the Trump administration and lawmakers had reached a two-year deal that raises limits on government borrowing to cover spending helped support the dollar, which weighed on foreign demand for dollar-denominated gold.

At 20:44 GMT, December Comex gold futures are trading 1430.90, down $8.70 or -0.60%.

Also contributing to the dollar’s strength was a steep drop in the Euro as investors prepared for news of fresh stimulus from the European Central Bank on July 25. Traders expect the ECB to issue dovish forward guidance and possibly more generous terms for its planned new multi-year loans. Money markets also indicated that the chances of a 10-basis point rate cut from the ECB had dropped to less than 40% from roughly 60% on Friday.

The dollar also traded higher against the British Pound after Boris Johnson won the prime minister election. Johnson has promised to lead Britain out of the European Union with or without a deal. This is known as a “hard exit”.

Daily December Comex Gold

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum shifted to the downside on Friday with the formation of a dramatic closing price reversal top at $1467.00.

A trade through $1467.00 will negate the closing price reversal top and signal a resumption of the uptrend. There is room to the upside over this level with the next major target the March 14, 2014 main top at $1532.40.

The main trend will change to down on a move through $1413.70. This is followed closely by a pair of main bottoms at $1399.80 and $1396.40.

The short-term range is $1396.40 to $1467.00. Its retracement zone at $1413.70 to $1423.40 provided support on Tuesday.

The intermediate range is $1335.10 to $1467.00. Its retracement zone at $1401.10 to $1385.50 is the next downside target.

The main range is $1285.10 to $1467.00. If the trend changes to down then its retracement zone at $1376.10 to $1354.60 will become the primary downside target.


Daily Swing Chart Technical Forecast

Based on Tuesday’s price action, the direction of the market at the early Wednesday opening is likely to be determined by trader reaction to the short-term 50% level at $1431.70.

Bullish Scenario

A sustained move over $1431.70 will indicate the presence of buyers. This could trigger a quick move into a minor pivot at $1447.30, followed by the main top at $1467.00.

Bearish Scenario

A sustained move under $1431.70 will signal the presence of sellers. The first target is the short-term Fibonacci level at $1423.40. If this fails then look for the selling to extend into the main bottom at $1413.70. Taking out this level will change the main trend to down.

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