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James Hyerczyk
Comex Gold

Gold futures are trading higher at the mid-session after plunging $72.50 earlier in the session from a new contract high. Some traders are saying that profit-taking and position-squaring ahead of the Fed’s monetary policy announcements on Wednesday was responsible for the sell-off. Others are blaming a stronger dollar as Congress debates new stimulus measures.

I tend to think it was a little of “buy the rumor, sell the fact” as Congress is likely to approve a stimulus package on Friday just like gold investors have been predicting for two weeks and amid speculation the Fed is going to turn a little more dovish. So a few of the gold bulls got what they were asking for and they decided to bail.

I don’t think China and the U.S. kissed and made up so the safe-haven buyers probably can’t explain a $72 intraday crash. I don’t think COVID-19 went away either, but I don’t think those are reasons to buy gold anyway. You buy gold because of what interest rates do.

I did notice that a lot of the bullish analysts didn’t comment on today’s price action. That’s typical. They don’t know how to trade a market. The most important thing for a trader is to have an exit strategy. I had been warning about a $38 correction for a few days so if you protected yourself then you got out ok. If you bought more than God Bless You because you’re doing ok at this time. There are still some warning signs out there, but ultimately you have to decide whether you want to buy strength or value.

At 15:45 GMT, December Comex gold is trading $1969.90, up $6.40 or +0.36%.

Daily December Comex Gold

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $2000.00 will signal a resumption of the uptrend.

The main trend will change to down on a trade through $1819.30. This is not likely today, but the price action suggests a closing price reversal top may be forming.

The intraday range is $2000.00 to 1927.50. Its 50% level combined with the opening price at $1963.20 and yesterday’s close at $1955.40 is controlling the price action today.

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Short-Term Outlook

Watch the price action and read the order flow at $1955.40 the rest of the session. A close below this level will form a potentially bearish closing price reversal top. If confirmed on Wednesday, this could lead to the start of a 2 to 3 correction.

The first downside target is a 50% level at $1909.70, followed by a pair of 50% levels at $1894.20 and $1886.00.

Since the trend is up, buyers are likely to come in on a pullback into these levels. I’m against buying strength because I don’t have an exit in mind.

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

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