Gold Rallies Overseas But Gains Abate as the Dollar Strengthens in New York

Gold’s Rollercoaster Ride: Dollar Strength and Market Resilience

An interesting start for the first trading day of 2024. In overseas trading, gold rallied trading to a high of $2088. These gains were short-lived once trading moved to the United States as dollar strength reversed the strong gains witnessed earlier. Gold futures traded to a low of $2064, before recovering. As of 5:15 PM EST gold futures basis the most active February contract is currently trading up $1.60 (+0.08%), and fixed at $2073.40.

Dollar strength was significant today gaining 0.82%, one of the largest single-day rises since the dollar began its decline in October of last year. Opening at 101.378 the dollar index climbed to a high of 102.253. Currently, the dollar index is just below its daily high fixed at 102.238. On a technical basis, the first level of resistance occurs at 102.497 which corresponds to the 61.8% Fibonacci retracement. The data set used for the retracement covers the rally in gold from 99.495 up to the most recent high above 107.

The fact that gold was able to close fractionally higher was a large accomplishment considering the headwinds that resulted from dollar strength to the tune of 0.82%. Because gold prices are paired with the dollar there was definitive buying of gold by traders and market participants otherwise gold would have closed significantly lower.

Technical Analysis

While we expect gold prices to rise throughout the year, at any point including current pricing we could see gold enter a short correction. If that does occur our first level of support would occur at approximately $2030 with major support at $1990. If gold continues its rise from the rally that began on December 14, we have three important levels of potential resistance.

These levels are based upon Fibonacci extensions rather than retracements because we are attempting to quantify how powerful the recent highs that occurred at the beginning of December.

The first level of minor resistance occurs at $2083 which is based upon a 50% extension. The next level of resistance would occur at approximately $2105; it is based upon a 61.8% Fibonacci extension. Major resistance occurs at $2138 and it is based upon a 78.6% Fibonacci extension. The data set used for the extension calculates the price move from the lows during the second week of November at $1960 up to the record high achieved on Monday, December 4 when gold futures briefly traded above $2150.

For those who would like more information simply use this link.

Wishing you as always good trading,

Gary S. Wagner