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James Hyerczyk
Gold

Gold futures are trading sharply higher at the mid-session on Wednesday after hitting new contract high. Spot gold hit its highest level since September 2011. Both markets are rising on bets that central banks would introduce more stimulus measures to ease the economic impact of coronavirus.

At 15:18 GMT, December Comex gold is trading $1882.40, up $12.80 or +0.68%.

Gold is receiving support from a combination of factors including lower U.S. interest rates, a weaker U.S. and an easing of demand for higher risk assets. Additionally, while the upside momentum in the stock market has slowed due to a rotation from high-flying technical stocks into cyclicals, money may be moving into gold because that seems to be where the action is. Speculators are attracted to momentum.

Daily December Comex Gold

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed earlier today when buyers took out yesterday’s high.

A trade through $1819.30 will change the main trend to down. This is highly unlikely, however. This type of price action typically ends with a closing price reversal top. That’s the pattern that short-term buyers should worry about. While not indicating a change in trend, it is often used to book profits before a steep 2 to 3 day correction.

Bullish traders should also note the size of the last three downswings so they know what they may have to give up in pursuit of the home run trade.

The most recent break was $1857.00 to $1819.30, or $37.70 in four days. The next break was $1827.10 to $1788.30, or $38.80 in 2 days and $1810.70 to $1772.00, or $38.70 in 2 days.

Given the current high at $1893.10, traders should be prepared for about a $38 pullback if the pattern holds true. This puts the nearest downside target at $1855.10.

For a look at all of today’s economic events, check out our economic calendar.
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