Price of Gold Fundamental Daily Forecast – ‘New’ Gold Bears Sweating Out Test of $1757.70 to $1776.50

Gold futures are trading flat at the mid-session on Thursday, mirroring the price movement in U.S. Treasury yields. A stronger U.S. Dollar, however is likely capping gains as well as a key technical resistance area.

The catalyst behind today’s benign price action are hawkish U.S. weekly initial claims and producer price reports. Both seem to be offsetting yesterday’s dovish U.S. consumer inflation report that eased fears over early tapering of economic support by the Federal Reserve.

At 15:50 GMT, December Comex gold is trading $1753.10, down $0.20 or -0.01%. This is down from an earlier high of $1759.60.

US Treasury Yields Flat after Jobless Claims Fall from Prior Week

U.S. Treasury yields are flat Thursday after initial jobless claims fell from the week prior for the third-straight week, following the release of weekly unemployment and PPI reports.

The number of initial jobless claims filed last week totaled 375,000, in line with estimates from economists surveyed by Dow Jones. The prior week’s reading was revised up by 2,000 to 387,000 claims. Bond yields initially rose in reaction to the data. Continuing jobless claims numbered 2.866 million last week, lower than the previous week and reaching a new pandemic-era low.

US Producer Prices Continue Uptrend

July’s producer price index came in hotter than expected Thursday morning. The index tracks the changes in prices companies get for the goods they produce and acts as a more indirect measure of inflation.

Wholesale prices jumped 1%, higher than economists’ estimates and matching June’s increase.

Daily Forecast

Technically, the main trend is down, but this week, momentum is neutral.

The main range is $1837.50 to $1677.90. Its 50% to 61.8 retracement zone is $1757.70 to $1776.50. The near-term direction of the gold market will be determined by trader reaction to this zone. So watch the price action and read the order flow if tested.

Another level to watch is last week’s close at $1763.10. With the trend down, this price is resistance, but it can become the trigger point for an acceleration to the upside if aggressive buyers can regain this price.

One reason for the uncertainty in the gold market at this time is that too many analysts called it a “Bear Market” when it went crashing to a 16-month low on Monday. When I saw that, my contrarian side came out.

The December Comex gold futures contract topped at $2129.60 on August 7, 2020. This was up from the March 2020 bottom at $1460.30. If you do the math then its 50% to 61.8% retracement zone is $1795.00 to $1716.00. Gold is currently trading inside this zone, which according to my analysis makes it long-term neutral.

We could go lower from here if sellers come in to defend $1757.70 to $1776.50. But to call gold bearish a year after its multi-year top is a little of a disservice to gold newsletter subscribers who pay for such valuable information.

We’ve all heard “buy the dip”. Well if a year-long break ending with massive liquidation selling wasn’t a dip, then what is a dip?

Trading to me is about finding low risk entry level trades. We may have seen that on Monday with the market already up about $80 from that low. We should know if gold is going to continue its bear market by how traders react to $1757.70 to $1776.50.

Meanwhile, those who finally called gold a bear market on Monday need to brush off their long-term charts and perhaps take some time to study price action.

I’ve seen gold analysts sweat out 50% to 61.8% retracements on the daily charts like their lives depended on it. Now we have a major one on the weekly chart, and they don’t know what to do with it.

If your strategy is to buy gold when its cheap then guess what?, it’s cheap. Under $1677.90 it will be cheaper, but will also be a higher risk buy since there is no support until $1460.30.

The longer-term direction will be determined by how traders respond to $1795.00 to $1716.00. So far, other than a little slop, it doesn’t look like the bulls have given up yet.