Gold Price Futures (GC) Technical Analysis – Bracing for Volatility After ECB Rate Announcement

Gold futures are inching lower on Thursday after posting a rebound rally the previous session, following a successful test of the key support area at $1699.10 to $1694.50.

Fundamentally, bullion is being weighed down by a bounce in U.S. Treasury yields and a slightly better U.S. Dollar. Furthermore, traders are being a little cautious head of scheduled remarks from U.S. Federal Reserve Chair Jerome Powell and interest rate decision by the European Central Bank (ECB) later in the session.

At 05:03 GMT, December Comex gold futures are trading $1725.90, down $1.90 or -0.11%. On Wednesday, the SPDR Gold Shares ETF (GLD) settled at $159.96, up $1.63 or +1.03%.

Early Eyes on ECB Policy Decision

Gold investors are looking for a super-sized rate hike from the ECB to battle soaring inflation at its policy decision at 12:15 GMT, followed by President Christine Lagarde’s news conference at 12:45 GMT.

Focus Remains on Fed

Fed officials reiterated on Wednesday they still are not convinced that the worst of the U.S. inflation scare has passed, suggesting the central bank will continue to lift rates aggressively. At the end of the trading session on Wednesday, the CME’s FedWatch Tool showed investors believe there is a 78% chance of a 75-basis-point rate hike on September 21.

Finally, Powell will participate in a discussion at Cato Institute conference later in the day, which could be his final public comments before the September 20-21 policy meeting.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through $1778.80 will change the main trend to up. A move through $1699.10 will signal a resumption of the downtrend.

The minor trend is also down. A trade through $1737.40 will change the minor trend to up. This will shift momentum to the upside.

On the downside, the major support is a long-term 50% level at $1709.10.

On the upside, the first resistance is a minor pivot at $1739.00, followed by $1760.40.

Daily Swing Chart Technical Forecast

Trader reaction to $1718.20 is likely to determine the direction of the December Comex gold futures contract on Thursday.

Bullish Scenario

A sustained move over $1718.20 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into $1737.40 to $1739.00.

Taking out $1739.00 could trigger a surge into $1760.40. This is the last potential resistance level before the $1778.80 main top.

Bearish Scenario

A sustained move under $1718.20 will signal the presence of sellers. This could trigger a break into the long-term 50% level at $1709.10. This is followed by three main bottoms at $1699.10, $1696.10 and $1694.50. The latter is a potential trigger point for an acceleration to the downside with $1618.00 the next major target.