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James Hyerczyk
Comex Gold
Comex Gold

Hawkish testimony before Congress from U.S. Federal Reserve Chairman Jerome Powell on Tuesday helped boost the U.S. Dollar and demand for risky assets, while driving gold prices to their lowest level since the week-ending February 3, 2017.

On Tuesday, August Comex gold futures settled at $1227.30, down $12.40 or -1.01%.

Powell stayed with the game plan laid out in the last Fed monetary policy statement in June, the recently released Fed minutes and his commentary from speeches and interviews, reiterating the strength in the economy and the need for gradual rate hikes. His hawkish tone was enough to send gold investors scrambling for the exits including those aggressive speculators who may have been playing with the long side of the market ahead of his testimony.

Daily August Comex Gold

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. It was reaffirmed on Tuesday when sellers drove prices through the July 7, 2017 main bottom at $1230.70 and the March 15, 2017 main bottom at $1228.20. The trend will change to up on a move through $1266.90.


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Daily Swing Chart Technical Forecast

Today’s tone will be determined by momentum and investor reaction to the former bottoms at $1228.20 and $1230.70.

Whenever long-term bottoms are taken out, there is always some doubt as to whether the breakdown was fueled by sell-stops or aggressive shorting. The implest way to tell is to watch the price action and read the order flow at these levels.

If new short-sellers are coming into the market then the former tops at $1228.20 and $1230.70 will act as resistance. If this occurs then look for the downside momentum to continue with the January 27, 2017 main bottom at $1217.20 the next target. If this price level fails, then gold could start a prolonged break since the next major target is the December 22, 2016 main bottom at $1159.10.

Overcoming $1228.20 will be the first sign that yesterday’s selling was fueled by sell-stops. Overtaking $1230.70 will indicate that shorts are beginning to cover. This will also indicate that bearish traders prefer to sell rallies than weakness at current price levels.

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