Gold Price Futures (GC) Technical Analysis – Forms Potentially Bearish Reversal Top on Rate Hike Fears

Gold futures are posting a potentially bearish closing price reversal top late in the session on Wednesday as hawkish remarks from U.S. Federal Reserve officials offset hopes of a let up in aggressive policy tightening following the release of a report showing softer-than-expected inflation data.

At 18:30 GMT, December Comex gold futures are trading $1807.10, down $5.20 or -0.29%. This is down from an intraday high of $1824.60. The SPDR Gold Shares ETF (GLD) is at $166.84, down $0.36 or -0.21%.

Inflation ‘Softer’ in July but Still Elevated

Today’s U.S. government consumer inflation report came in “softer” than expected with headline inflation coming in flat in July and core inflation climbing 0.3%, below expectations.

Gold prices firmed initially on the news, but began to retreat when traders realized the report still showed underlying inflation pressures remain elevated, meaning the Federal Reserve will continue to contemplate whether to embrace another super-sized interest rate hike in September.

Fed Members Kashkari and Evans Call for Aggressive Rate Hikes

After reversing its earlier gains, gold extended its losses after Minneapolis Fed President Neel Kashkari and Chicago Fed President Charles Evans reaffirmed an aggressive path for interest rate hikes.

Kashkari said the U.S. central bank will need to raise its policy rate to 3.9% by year-end to 4.4% by the end of 2023 to tame inflation.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum may be getting ready to shift to the downside.

A trade through $1824.60 will signal a resumption of the uptrend. A move through $1727.00 will change the main trend to down.

The minor trend is also up. A trade through $1770.00 will change the minor trend to down. This will shift momentum to the downside

The main range is $1900.80 to $1696.10. The market is currently trading inside its retracement zone at $1798.50 to $1822.60. This zone is controlling the near-term direction of the market.

The first minor range is $1727.00 to $1824.60. Its 50% level at $1775.80 is the first downside target.

The second minor range is $1696.10 to $1824.50. If the minor trend changes to down then look for a break into its pivot at $1760.40.

Short-Term Forecast

Trader reaction to $1812.30 will determine the direction of the December Comex gold futures contract into the close on Wednesday.

Bearish Scenario

A sustained move under $1812.30 will indicate the presence of sellers. The first downside target is the main 50% level at $1798.50. Buyers could come in on the first test of this level. If it fails then look for the selling to possibly extend into the first pivot at $1776.20.

Bullish Scenario

A sustained move over $1812.30 will signal the presence of buyers. This could trigger a late session surge into the main Fibonacci level at $1822.60, followed by the intraday high at $1824.60.

Side Notes

A close under $1812.30 will form a closing price reversal top. If confirmed on Thursday, this could trigger the start of a 2 to 3 day correction with the pivot at $1760.40 the minimum downside target.