Gold Price Futures (GC) Technical Analysis – Light CPI Report has Bulls Eyeing $1824.60

Gold futures soared over 2.25% on Thursday to its highest level since August 23 after a government report showed U.S. inflation cooled off a bit in October, lifting optimism that the Federal Reserve would adopt a less aggressive approach to tightening policy starting in December.

The headline U.S. consumer price index (CPI) rose 0.4% last month after climbing by the same margin in September, the Labor Depart said. Economists polled by Reuters had forecast an advance of 0.6%.

Excluding volatile food and energy components, the so-called Core CPI increased 0.3% on a month-over-month basis after gaining 0.6% in September.

On Thursday, December Comex gold futures settled at $1753.70, up $40.00 or +2.28%. The SPDR Gold Shares ETF (GLD) finished at $163.48, up $4.83 or +3.04%.

Gold Lifted by Drop in Treasury Yields, Weaker US Dollar

The surprisingly weak consumer inflation report drove U.S. Treasury yields sharply lower as traders priced in an 85.4% probability of a 50 basis point rate hike in December. Gold rallied because lower yields tend to make non-yielding gold more attractive. In this case, short-sellers, looking for more aggressive rate hikes from the Fed, were forced to cover when the CPI news was released.

Lower yields also made the greenback a less-attractive investment. This drove up demand for dollar-denominated bullion.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed on Thursday when buyers took out a pair of swing tops at $1738.70 and $1746.40.

A trade through $1618.30 will change the main trend to down. This is highly unlikely, but the fast rally has put it in a position to form a closing price reversal top. This won’t change the main trend to down, but if confirmed, it could trigger a 2 to 3 day correction.

The main range is $1824.60 to $1618.30. The market is currently trading on the strong side of its retracement zone at $1745.80 to $1721.50, making it support.

Gold also closed on the strong side of a long-term retracement zone at $1709.10 to $1609.30, turning it into another resistance area.

Daily Swing Chart Technical Forecast

Trader reaction to the Fibonacci level at $1745.80 is likely to determine the direction of the December Comex gold futures contract early Friday.

Bullish Scenario

A sustained move over $1745.80 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into the main top at $1778.80. This is a potential trigger point for an acceleration to the upside with $1824.60 the next major target.

Bearish Scenario

A sustained move under $1745.80 will signal the presence of sellers. This could trigger a pullback into a pair of 50% levels at $1721.50 and $1709.10. Since the main trend is up, buyers could come in on a test of these levels.