Gold Price Futures (GC) Technical Analysis – Reaction to $1798.50 – $1822.60 Determines Near-Term Tone

Gold futures are trading lower at the mid-session despite another weaker-than-expected U.S. inflation report that suggested the Fed may not have to raise interest rates as aggressively as previously thought.

On paper this sounds bullish for gold, but traders are realizing that it’s going to take more than one month of favorable dips in consumer and producer inflation to encourage the Fed to pull back on its plans to raise rates until consumer inflation falls to its mandated 2%.

Investors don’t like higher interest rates because bullion doesn’t pay interest to hold it. Therefore, they try to avoid it during a rising rate environment.

At 18:06 GMT, December Comex gold futures are trading $1805.10, down $8.60 or -0.47%. The SPDR Gold Shares ETF (GLD) is at $166.73, down $0.05 or -0.03%.

PPI Unexpectedly Drops

U.S. producer prices unexpectedly fell in July amid a drop in the cost for energy products, and underlying inflation appears to be on a downward trend.

The producer price index for final demand declined 0.5% last month after climbing 1.0% in June, the Labor Department said on Thursday. In the 12 months through July, the PPI increased 9.8% after advancing 11.3% in June. Economists polled by Reuters had forecast the PPI would rise 0.2% in July and increase 10.4% on a year-on-year basis.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $1824.60 will signal a resumption of the uptrend. A move through $1727.00 will change the main trend to down.

The minor trend is also up. A trade through $1824.60 will reaffirm the minor trend. A move through $1770.00 will change the minor trend to down. This will shift momentum to the downside.

The intermediate range is $1900.80 to $1696.10. The market is currently testing its retracement zone at $1798.50 to $1822.60. The upper level stopped the rally at $1824.60 on Wednesday.

The first minor range is $1727.00 to $1824.60. Its 50% level at $1776.20 is support. The second minor range is $1696.10 to $1824.60. If the minor trend changes to down then its pivot at $1760.40 will become the next target.

Short-Term Outlook

Trader reaction to the intermediate 50% level at $1798.50 is likely to determine the direction of the December Comex gold futures contract into the close on Thursday.

Bullish Scenario

A sustained move over $1798.50 will indicate the presence of buyers. If this creates enough upside momentum then look for a late session surge into the intermediate Fibonacci level at $1822.60, followed by the minor top at $1824.60.

Bearish Scenario

A sustained move under $1798.50 will signal the presence of sellers. This could trigger a late session break into the first pivot at $1776.20.