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James Hyerczyk
Comex Gold

Gold futures are edging higher at the mid-session on Wednesday after an earlier plunge into its lowest level since July 22. The price action suggests that investors may have found a value zone after a steep four day plunge.

Stock traders are rotating from growth to value, but gold investors don’t have that luxury. They have to sell at high prices after buying because of growth expectations, and they have to re-enter when prices hit a value area, in today’s case, 50% to 61.8% of the rally from June 5 to August 7.

At 17:21 GMT, December Comex gold is trading $1952.60, up $30.80 or +1.75%.

Never confuse a steep plunge with a change in trend. They aren’t the same thing. Gold may have plunged, but ll it did was take out a few minor bottoms, shifting momentum to the downside. It did not change the trend.

Daily December Comex Gold

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $1819.30 will change the main trend to down, while a move through $2089.20 will signal a resumption of the uptrend.

The minor trend is down. This shifted momentum to the downside.

The main range is $1690.10 to $2089.20. Its retracement zone is $1889.70 to $1842.80. Today’s low at $1874.20 occurred inside this zone.

The new minor range is $2089.20 to $1874.20. Its retracement zone at $1981.70 to $2007.10 is the first upside target.

This zone is important because it will decide whether prices head higher or lower over the near-term.

Bullish traders want to take out $2007.10 so that they could challenge $2089.20. At the same time a new higher bottom will form at $1874.20.

Bearish traders will show up on a test of $1981.70 to $2007.10. They are going to try to form a potentially bearish secondary lower top.


Short-Term Outlook

Wednesday was the third day down from Friday’s closing price reversal top. We said at that time that if confirmed, we should see a 2 to 3 day correction of about 50% to 61.8% of the last rally. The trade to $1874.20 and the subsequent rally confirmed our forecast. Now we have to see how traders react to a test of $1981.70 to $2007.10.

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