Gold Price Futures (GC) Technical Analysis – Rally was Just Short-Covering if $1839.00 Fails as Support

Gold futures are edging higher early Thursday after a surge in U.S. consumer inflation (CPI) drove the metal to its highest level since June 15 the previous session.

The U.S. Consumer Inflation Index accelerated in October as Americans paid more for gasoline and food, leading to the biggest annual gain in 31 years, more signs that inflation could stay uncomfortably high well into 2022 amid snarled global supply chains.

At 03:15 GMT, December Comex gold is trading $1847.60, down $0.70 or -0.04%.

In other economic news, the U.S. Labor Department said initial jobless claims last week fell to the lowest level since the middle of March in 2020.

In Fedspeak, San Francisco Federal Reserve Bank President Mary Daly on Wednesday said she expects high inflation to moderate once COVID-19 recedes, and repeated that it would be “quite premature” to raise rates now or even to speed up the Fed’s bond-buying taper.

Where Do We Go From Here?

You don’t have to be an expert chart reader to see there was no resistance on the daily chart from $1839.00 to $1919.10, so predicting a breakout in gold was no major fete. Nonetheless, the market stopped at $1870.60. The breakout is in the past, besides we are all as good as our last trade anyway.

So where do we go from here? That will be determined by trader reaction to the breakout price at $1839.00. We need to see a bid at that price. We need to see that buyers are actually defending this “breakout price”. If they don’t then we have to conclude that Wednesday rally was nothing but a big fat short-covering rally. In a real bull market, traders are will to be strength. We have no evidence of that taking place yet.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $1870.60 will signal a resumption of the uptrend. A move through $1758.50 will change the main trend to down.

The main range is $1922.00 to $1677.90. The market is currently trading on the strong side of its retracement zone, making it support.

The long-term retracement zone at $1795.00 to $1716.00 is additional support.

The new minor range is $1758.50 to $1870.60. Its retracement zone at $1774.30 to $1751.50 is additional support.

Daily Swing Chart Technical Forecast

The direction of the December Comex gold futures contract on Thursday is likely to be determined by trader reaction to $1846.80.

Bullish Scenario

A sustained move over $1846.80 will indicate the presence of buyers. If this move creates enough upside momentum then look for a possible surge into $1870.60.

Taking out $1870.60 could trigger an acceleration into $1919.10 to $1922.00 if the buying volume is strong enough.

Bearish Scenario

A sustained move under $1846.80 will signal the presence of sellers. The first downside target is $1839.00. Buyers could come in on the first test of this level. If it fails then look for a further break into $1828.80.

If $1828.80 fails then look for the selling to possibly extend into $1814.50. Look for buyers on a pullback into this level.

The major support area remains $1800.00 to $1795.00.