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James Hyerczyk
Comex Gold

Gold is trading sharply higher on Thursday in reaction to extremely dovish European Central Bank monetary policy decisions. The rally is being fueled by the announcement of a massive new bond-buying program by the ECB in an effort to stimulate the troubling Euro Zone economy.

The ECB also cut its main deposit rate by 10 basis points to -0.5%, a record low but in line with market expectations. Additionally, the ECB changed its TLTRO (targeted long-term refinancing operations) rate to provide more favorable bank lending conditions and match that of its refinancing rate, erasing a previous 10-basis point spread.

At 12:47 GMT, December Comex gold futures are trading $1529.10, up $26.00 or +1.74%.

Gold is rallying despite a spike higher in the U.S. Dollar Index, which is unusual because a stronger U.S. Dollar tends to weaken demand for dollar-denominated gold. The move is being fueled because of the decline in the already lower negative interest rates. Gold doesn’t pay interest but a zero return is better than a negative return.

Gains are likely being limited because U.S. rates may go down, but the Fed is far from turning to the negative side. Furthermore, there is renewed hope of a trade deal between the U.S. and China.

Daily December Comex Gold

Daily Technical Analysis

The main trend is down according to the daily swing chart. Today’s rally is only a retracement of the recent break. It’s not even a shift in momentum to the upside.

A trade through $1492.10 will signal a resumption of the downtrend. A move through $1566.20 will change the main trend to up.

The short-term range is $1566.20 to $1492.10. Its retracement zone at $1529.20 to $1537.90 is potential resistance. Trader reaction to this zone will determine the near-term direction of the gold market. Sellers are going to try to form a secondary lower top.

The first main range is $1412.10 to $1566.20. Its retracement zone at $1489.10 to $1471.00 is major support.


Daily Technical Forecast

Based on the early price action and the current price at $1529.10, the direction of the December Comex gold futures market the rest of the session on Thursday is likely to be determined by trader reaction to the uptrending Gann angle at $1528.10.

Bearish Scenario

A sustained move under $1528.10 will indicate the presence of sellers. The first downside target is a downtrending Gann angle at $1518.20. Crossing to the weak side of this angle will indicate the selling is getting stronger. This could trigger a break into the uptrending Gann angle at $1498.40. This is followed by the major retracement zone at $1489.10 to $1471.00.

Bullish Scenario

A sustained move over $1528.10 will signal the presence of buyers. This could lead to a test of the short-term 50% level at $1529.20, the short-term Fibonacci level at $1537.90 and the downtrending Gann angle at $1542.20.

Overtaking $1542.20 will indicate the buying is getting stronger. This could trigger a further rally into a pair of downtrending Gann angles at $1554.20 and $1560.20. The latter is the last potential resistance angle before the $1566.20 main top.

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