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James Hyerczyk
Comex Gold

Gold futures are trading higher at the mid-session on Thursday, but contrary to what you may have read, the reaction to today’s European Central Bank (ECB) monetary policy announcements triggered a very limited reaction.

Sure, the market hit a new high for the session at $1343.30, but it was trading $1339.40 at the time of the announcements. Currently, it’s trading at $1340.70 so I have to conclude that gold traders didn’t really think the news was bullish.

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The ECB left interest rates unchanged as expected. The Euro rose on the news as they anticipated an even more dovish signal from the central bank. Instead, the ECB refrained from hinting at an interest rate cut, choosing instead to push back the timing of its first post-crisis rate hike.

Gold could still rally late in the session, but it’s not going to be in reaction to the ECB news. Instead, a weaker U.S. Dollar, and expectations of a Fed rate cut are likely to underpin the market.

Just to be clear, the Euro is rising against the U.S. Dollar because the ECB was not as dovish as expected, and the dollar is weakening because comments from Fed Chair Powell hinted at a shift in policy to dovish. This represents a mild flip in the divergence between the monetary policies of the two central banks.

At 15:20 GMT, August Comex gold futures are trading $1340.70, up $7.10 or +0.55%.

Daily August Comex Gold

Daily Technical Analysis

The main trend is up according to the daily swing chart. A trade through $1348.90 will signal a resumption of the uptrend. This could lead to a test of the next main top at $1361.50.

The market isn’t close to changing the main trend to down, but due to the prolonged rally in terms of price and time, the market is inside the window of time for a potentially bearish closing price reversal top. What we need is a higher-high and a lower-close to create this chart pattern.

The longer-term retracement zone is $1332.60 to $1307.70. This zone is major support. Trading on the strong side of this zone is helping to give the market a strong upside bias. Falling back inside this zone will turn the market neutral.

The short-term range is $1274.60 to $1348.90. If there is a normal correction then look for a move into its retracement zone at $1311.80 to $1303.00. Inside this zone is the longer-term 50% level at $1307.70. This area is likely to become major support.

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Daily Technical Forecast

Based on the early price action, the direction of the August Comex gold futures contract the rest of the session is likely to be determined by trader reaction to the downtrending Gann angle at $1343.00.

Bullish Scenario

A sustained move over $1343.00 will indicate the presence of buyers. If this creates enough upside momentum then look for the rally to possibly extend into yesterday’s high at $1348.90, followed by a downtrending Gann angle at $1352.30. This is the last potential resistance angle before the $1361.50 main top.

Bearish Scenario

A sustained move under $1343.00 will signal the presence of sellers. If this generates enough downside momentum then look for the selling to possibly extend into the major Fibonacci level at $1332.60. This is the trigger point for a potential break into the downtrending Gann angle at $1324.50 and an uptrending Gann angle at $1318.60.

Overview

Traders are a little confused by the ECB decision, however, a weaker U.S. Dollar will continue to be support. Gold prices will weaken if the dollar can turn higher for the session.

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