Gold is Unable to Hold $1800 After Trading to a High of $1815

Gold futures traded to an intraday high today of $1815.70. However, with only 45 minutes left in Globex trading (New York trading has already closed) gold futures basis, the most active February 2021 Comex contract is trading up by $0.70 (+0.04%) and fixed at $1798.90.

Over the last two trading days, gold has challenged $1800 but has not effectively closed above that key psychological price point since mounting a strong rally yesterday, which took gold’s close yesterday to $1798.10. Today gold opened at $1801.50 and traded to a low of $1796.50.

Currently, gold is being supported by several factors. First, there is risk-off market sentiment in regards to U.S. equities. All three major indices closed lower on the day, with the Dow Jones industrial average declining by 1.46%, the NASDAQ composite closing fractionally lower off by 0.07%, and the Standard & Poor’s 500 declining by 1.03%.

Secondly, there is uncertainty in regards to an economic contraction based upon the recent surge of Covid-19 daily infections as well as the impact of the new variant “Omicron.” The Delta variant accounts for the majority of new daily infections globally. However, according to the World Health Organization’s Director-General Tedros Adhanom, Ghebreyesus 77 countries have now reported cases of the new variant “Omicron is spreading at a rate we have not seen with any previous variant. We’re concerned that people are dismissing Omicron as mild. Surely, we have learned by now that we underestimate this virus at our peril.”

Lastly, there are still concerns about inflation which is still at a 40 year high. In an interview with MarketWatch, Colin Cieszynski, chief market strategist at SIA Wealth Management, said that there is “increasing concerns about inflation,” which was enough to push the Federal Reserve and European Central Bank to accelerate tapering of bond purchases and the Bank of England to raise interest rates.”

Pressuring gold today was a solid gain in the dollar. The dollar index gained 60 points today (0.62%) and is currently fixed at 96.615. According to the Kitco Gold Index as of 4:10 PM, EST spot gold was trading down by one dollar and fixed at $1798.30. Although gold had a net gain of $11.20, dollar strength more than compensated for today’s gains resulting in gold losing $12.20 in value.

Our technical studies indicate that the current resistance levels occur first between $1800 and $1804.60 (the 61.8% Fibonacci retracement), with major resistance at $1818 (the 50% retracement level). Additionally, the first level of support for gold occurs at $1758.30, with major support at $1732.60.

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Wishing you as always good trading and good health,

Gary S. Wagner