Based on the early price action and the current price at $1514.10, the direction of the December Comex gold market on Friday is likely to be determined by trader reaction to the short-term pivot at $1515.60.
Gold futures are trading nearly flat early Friday as investors await the release of the U.S. Non-Farm Payrolls report for September at 12:30 GMT. The market has been supported this week by a string of bearish U.S. economic reports that have driven up the chances of a Fed rate cut at the end of October from 20% last Friday to 92.5% at the end of the session on Thursday.
At 08:08 GMT, December Comex gold is trading $1514.10, up $0.30 or +0.02%.
The weak economic data is fanning the flames of recession, driving down U.S. Treasury yields and making the U.S. Dollar a less-attractive asset. A weaker dollar tends to drive up foreign demand for dollar-denominated gold.
The reason why gold hasn’t taken off to the upside is because the Euro is weaker. Furthermore, even if the Fed cuts rates, other central banks are sure to follow so the U.S. Dollar will remain the world’s strongest currency.
The main trend is down according to the daily swing chart. However, momentum shifted to the upside with the formation of the closing price reversal bottom at $1465.00 on October 1.
The main trend will change to up on a move through $1543.30. A trade through $1465.00 will negate the closing price reversal bottom and signal a resumption of the downtrend.
On the downside, the support is a series of retracement levels at $1489.20, $1481.30, $1471.00 and $1461.30.
The short-term range is $1566.20 to $1465.00. Its retracement zone at $1515.60 to $1527.50 is resistance. This zone stopped the selling on Thursday at $1525.80.
Based on the early price action and the current price at $1514.10, the direction of the December Comex gold market on Friday is likely to be determined by trader reaction to the short-term pivot at $1515.60.
A sustained move over $1515.60 will indicate the presence of buyers. This could trigger a surge into the Fibonacci level at $1527.50.
Taking out $1527.50 will indicate the buying is getting stronger. If this creates enough upside momentum then look for a rally into the main top at $1543.30. Taking out this top will change the main trend to up.
A sustained move under $1515.60 will indicate the presence of sellers. The daily chart is wide open to the downside with $1489.20 the next likely target.
Given the price action this week, I think the NFP report is going to have to be extremely bearish to change the trend is gold. Buyers have been very tentative this week with most of the rally being fueled by short-covering.
Furthermore, it’s difficult to flip from bearish, which professionals were on Monday, to bullish based on the weak reports this week.
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.