Gold Price Futures (GC) Technical Analysis – Trying to Form Potentially Bullish Closing Price Reversal Bottom

Gold futures are trading at its low of the session late Wednesday after the U.S. Federal Reserve announced a 75 basis point rate hike as widely expected and indicated it will keep hiking well above the current level.

At 18:19 GMT, December Comex gold futures are trading $1670.70, down $0.40 or -0.02%. The SPDR Gold Shares ETF (GLD) is at $154.80, down $0.27 or -0.17%.

Fed to Keep Raising Rates for a While

Along with the massive rate increases, Fed officials signaled the intention of continuing to hike until the funds level hits a “terminal rate,” or end point of 4.6% in 2023. Additionally, the “dot plot” of individual member’s expectations doesn’t point to rate cuts until 2024.

In their quarterly updates of estimates for rates and economic data, officials coalesced around expectations for the unemployment rate to rise to 4.4% by next year from its current 3.7%.

GDP growth is also expected to slow to 0.2% for 2022, rising slightly in the following years to a longer-term rate of just 1.8%.

Finally, headline inflation is expected to drift down to 5.4% this year, as measured by the Fed’s preferred personal consumption index and core inflation is expected to decline to 4.5% this year.

Short-Term Outlook

With the Fed essentially delivering what the market expected, short-sellers may decide to book profits and regroup at more favorable price levels. This makes the market vulnerable to a closing price reversal bottom.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through the intraday low at $1661.30 will signal a resumption of the downtrend. The main trend will change to up on a trade through $1746.40.

The nearest resistance is the long-term 50% level at $1709.10. The nearest support is the long-term Fibonacci level at $1609.30.

Daily Swing Chart Technical Forecast

Trader reaction to $1671.10 is likely to determine the direction of the December Comex gold futures contract into the close on Wednesday.

Bearish Scenario

A sustained move under $1671.10 will indicate the presence of sellers. Taking out the intraday low at $1661.30 will indicate the selling pressure is getting stronger. This could trigger an acceleration to the downside with $1618.00 to $1609.30 the next target zone.

Bullish Scenario

A sustained move over $1671.10 will signal the presence of buyers. This could trigger an acceleration into $1689.90. Taking out this level will indicate the short-covering is getting stronger with $1694.50 and $1709.10, potential targets.

Side Notes

A close over $1671.10 will form a potentially bullish closing price reversal bottom. This won’t change the main trend to up, but if confirmed, it could trigger the start of a 2 to 3 counter-trend rally.