Gold traded up early Wednesday and in a position to do something it has not done in 8 trading sessions: take out the previous day’s high. With Treasury yields inching lower and the US stock indexes weakening some, it looks as if gold is attracting a little buying. But, cannot tell if its speculative buying, but there is a little profit-taking and short-covering happening.
At 04:34 GMT, December COMEX gold futures are trading 1461.30, up 7.60 or +0.52%.
The main trend for gold is down according to the daily swing chart. A trade through 1446.20 will signal a resumption of the downtrend. The main trend will change to up on a trade through 1522.30.
The minor trend is also down: a trade through 1461.30 will make 1446.20 a new minor bottom.
The main range is 1412.10 – 1566.20. Its Fibo retracement zone at 1471.00 – 1489.20 is controlling the near-term direction of the gold market.
The short-term range is 1522.30 – 1446.20. Its 50% retrace mark at 1484.10 is a Northside target. It falls inside the main retracement zone.
Based on the price action, the direction of the December COMEX gold futures contract Wednesday was determined by trader reaction to Tuesday’s high at 1461.30.
A sustained move over 1461.30 will indicate the presence of buyers. This will likely be fueled by buy stops placed by “dumb money”. The worst place to put a stop is over the previous day’s high or under the previous day’s low. If this is able to create enough upside momentum then look for the rally to possibly extend into the main Fibonacci mark at 1471.00.
Overcoming 1471.00 will indicate the buying is getting stronger. This could drive a further move in prices into the 50% marks at 1484.10 and 1489.20.
A sustained move under 1461.30 will signal the presence of sellers. The inability to overcome and sustain a rally over 1461.30 will also indicate the buying wasn’t even strong enough to hit the “dumb money” stops. This could lead to a retest of Wednesday’s low at 1446.20.
The Key objectives are the 1 August bottom at 1412.10 and the 1 July bottom at 1396.40. But, we will not not get there unless US Treasury yields continue to rise beyond their August highs.