Gold Price Futures (GC) Technical Analysis – Underpinned by Weak Dollar Ahead of CPI Data

Gold futures are inching lower on Wednesday with gains being capped by a slight rise in U.S. Treasury yields and a firm U.S. Dollar. The market is likely being underpinned by the momentum from yesterday’s 2.07% gain.

At 07:31 GMT, December Comex gold futures are trading $1714.80, down $1.20 or -0.07%. On Tuesday, the SPDR Gold Shares ETF (GLD) settled at $159.43, up $3.58 or +2.30%.

Strong Euro Pushes Gold Higher

Gold hit a one-month high the previous session as the U.S. Dollar fell sharply against a basket of peers in a move driven mostly by the strength in the Euro.

Little Impact from Midterm Elections, Cautious Trade Ahead of CPI Data

Traders are showing little reaction to the on-going midterm elections. It could be that the results won’t officially be known until late Wednesday or early Thursday. Or they may feel the key market driver is monetary policy rather than fiscal policy.

Either way, the trade seems a little subdued as traders remain cautious ahead of Thursday’s U.S. consumer price index (CPI) report.

Economists are predicting a deceleration in both the monthly and yearly core CPI to 0.5% and 6.5%, respectively, according to a Reuters poll.

Rate Hike Expectations Supportive

Gold is being supported by expectations of a slowdown in the size of the Fed’s December rate hike. As of the close on Tuesday, the FedWatch tool was predicting a 67% chance of a 50-basis point rate hike and a 33% chance of a 75 basis point rate hike.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through the next main top at $1738.70 will reaffirm the uptrend. A move through $1618.30 will change the main trend to down.

The main range is $1824.60 to $1618.30. Its retracement zone at $1721.50 to $1745.80 is the next upside target and possible resistance zone.

The long-term 50% level at $1709.10 is support, followed by the short-term retracement zone at $1692.70 to $1678.50.

The new minor range is $1618.30 to $1720.40. Its pivot at $1652.40 is another potential support level.

Daily Swing Chart Technical Forecast

Trader reaction to the 50% level at $1709.10 is likely to determine the direction of the December Comex gold futures contract on Wednesday.

Bullish Scenario

A sustained move over $1709.10 will indicate the presence of buyers. Taking out the 50% level at $1721.50 will indicate the buying is getting stronger and could trigger an acceleration to the upside with the main top at $1738.70 the first target, followed by the Fibonacci level at $1745.80.

Bearish Scenario

A sustained move under $1709.10 will signal the presence of sellers. This could lead to a labored break with potential targets coming in at $1692.70 and $1678.50. The latter is a potential trigger point for an acceleration into the pivot at $1652.40.