Price of Gold Fundamental Daily Forecast – Are We Dealing with the Old Adage: “Never Short a Quiet Market”?

Unless there is a dramatic surprise event, it looks as if traders are likely to grow content with holding prices in a range. Of course, knowing if the hedge funds and money managers are continuing to build record net short positions, or beginning to unwind them, would definitely tip us off on the likely direction. But we’re not going to know about that until Friday.
James Hyerczyk
Gold Chart
Gold Chart

Gold is trading flat shortly before the regular U.S. session opening on Wednesday. There was no follow-through to the upside after yesterday’s dramatic reversal bottom and the market is trading inside yesterday’s range. This suggests investor indecision and impending volatility.

It’s a hard read without know the volume at current price levels. Yesterday’s rally may have been technically related, or it may have been bullish counter-trend buyers showing an indifference to the Fed’s rate hike later this month. Gold traders could also be saying that the next round of U.S. tariffs on China, and the world’s second largest economy’s expected retaliation, have already been priced into the market.

The only conclusion we can draw from the price action at this time is that there is some posturing going on at current price levels. Unfortunately, we won’t know until Friday when the CFTC releases its Commitment of Traders report, whether shorts are covering, or new speculators are entering the market.

At 0948 GMT, December Comex Gold is trading $1202.30, up $0.01 or basically flat on the day.

Forecast

There is news later today, but unless the U.S. Producer Price Index report just clean blows away the forecast to the upside, I don’t expect the news to ignite much of a rally.

Technical chart watchers are fully-aware of the major retracement zone at $1205.90 to $1215.10. This zone is resistance and currently blocking forward progress.

Yesterday, we saw buyers come in at $1192.70. This was inside a short-term retracement zone at $1193.90 to $1187.60. This could be an indication that bullish traders are trying to build a secondary higher bottom.

For bullish traders, it comes down to buying on the dips into $1193.90 to $1187.60, or playing for an upside breakout over $1215.10, or the main top at $1220.70.

Knowing the important support and resistance zones seems to be the easy part. Timing the news is the hard part. We know the Fed is going to raise rates on September 26, but we aren’t sure what they will do in December, although there is a better than 50% chance they will raise again.

We also aren’t sure about the timing of the next round or tariffs, or the outcome of the Mid-term elections in early November.

That being said, unless there is a dramatic surprise event, it looks as if traders are likely to grow content with holding prices in a range.

Of course, knowing if the hedge funds and money managers are continuing to build record net short positions, or beginning to unwind them, would definitely tip us off on the likely direction. But we’re not going to know about that until Friday.

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