The direction of the December Comex gold market into the close on Wednesday will be determined by trader reaction to $1768.30.
Gold futures are down sharply at the mid-session after weak longs liquidated aggressively ahead of the key U.S. Federal Reserve announcements at 18:00 GMT. The price action suggests investors are expecting a dovish tone from the Fed.
Policymakers are widely expected to announce it would be reducing its massive stimulus, but traders want to know how the Fed plans to stop the rapidly rising inflation. The CME’s FedWatch tool indicates that traders are predicting a sooner-than-expected rate hike in June 2022 as well as two-more hikes. Goldman Sachs sees at least two rate hikes next year.
This analyst believes the Fed will take a wait and see approach as to its first rate hike and the frequency of others.
At 17:04 GMT, December Comex gold is trading $1762.80, down $26.60 or -1.49%.
Today’s price action suggests traders are looking for the Fed to issue a hawkish monetary policy statement. If the Fed doesn’t come out as hawkish as expected, prices could shoot higher later in the session. The sell-off could worsen if the Fed comes across as extremely hawkish.
The main trend is down according to the daily chart. The trend turned down when sellers took out $1760.30 earlier in the session. A trade through $1815.50 will change the main trend to up.
The minor trend is also down. A trade through $1812.70 will change the minor trend to up. This will also shift momentum to the upside.
On the downside, potential support is a 50% level at $1757.40, and a pair of Fibonacci levels at $1738.60 and $1716.00.
On the upside, potential resistance is layered at $1768.30, $1780.50, $1795.00 and $1800.00.
The direction of the December Comex gold market into the close on Wednesday will be determined by trader reaction to $1768.30.
A sustained move under $1768.30 will indicate the presence of sellers. The first downside target is $1757.40. If this price fails then look for a plunge into $1738.60. This is another trigger point for a steep break into $1716.00.
The Fibonacci level at $1716.00 is a potential trigger point for an acceleration to the downside with $1677.90 the next major target.
Overcoming $1768.30 will indicate the presence of buyers. This could lead to a labored really with potential resistance levels lined up at $1780.50, $1795.00 and $1800.00.
The 50% level at $1800.00 is a potential trigger point for an acceleration to the upside with $1828.80 the next target.
For longer-term investors, the major pivot is $1795.00.
James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.