The direction of the December Comex gold market on Wednesday is likely to be determined by trader reaction to $1738.60.
Gold futures are edging higher early Wednesday, mirroring the price action in U.S. Treasury yields and the U.S. Dollar. Nonetheless, the market is still hovering just above a seven-week low that was struck the previous session as Treasury yields jumped on growing expectations of an earlier-than-anticipated interest rate hike by the U.S. Federal Reserve.
At 04:21 GMT, December Comex gold futures are trading $1738.90, up $1.40 or +0.08%.
The U.S. Dollar Index hovered near a more than 10-month high, touched on Tuesday. The benchmark U.S. 10-year Treasury yields held close to over a three-month peak, increasing the opportunity cost of holding non-interest bearing bullion.
Gold futures found some support on Tuesday after Fed Chair Jerome Powell cast some doubt over a quicker than expected rate hike when he said the U.S. economy is still far from achieving maximum employment, a key component of the central bank’s requirements for raising interest rates.
The main trend is down according to the daily swing chart. A trade through $1727.80 will signal a resumption of the downtrend. The main trend will change to up on a move through $1788.40.
The main range is $1677.90 to $1836.90. Gold is currently testing its retracement zone at $1738.60 to $1757.40. This area is potential resistance.
The short-term range is $1836.90 to $1727.80. Its 50% level at $1782.40 is the next key upside target.
On the downside, the nearest support is the long-term Fibonacci level at $1716.00.
The direction of the December Comex gold market on Wednesday is likely to be determined by trader reaction to $1738.60.
A sustained move over $1738.60 will indicate the presence of buyers. If this move generates enough upside momentum then look for the rally to possibly extend into a pair of 50% levels at $1757.40 and $1758.10. Since the main trend is down, look for sellers on the first test of this area.
Overtaking $1758.10 could trigger an acceleration to the upside with $1782.40 the next potential upside target.
A sustained move under $1738.60 will signal the presence of sellers. If this creates enough downside momentum then look for a retest of $1727.80. Taking out this level could extend the selling into $1716.00.
The long-term Fibonacci level at $1716.00 is a potential trigger point for an acceleration to the downside with the August 8 main bottom at $1677.90 the next likely target price.
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.