Hawaii Six O - Gary Wagner
Gold opened below the 50-day moving average and broke strongly to the upside
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Gold futures basis the most active December contract opened in trading today at $1678. After trading to a low of $1667, December gold broke strongly above the 50-day moving average in a single hour. The first hour of trading in New York contained almost the entire trading range in gold.
In the time of one hour gold made gained $35 starting on the New York open ($1678.0 and one hour later was at $1716.90. For the six hours following gold's dynamic break to the upside gold consolidated in a very small range trading to a high of $1720.40 and a low of $1712 with little volatility following the dynamic swing.
As of 4:43 PM, EST December futures are currently fixed at $1715.80 after factoring in today's gain of $35.30 or 2.10%. While the dollar played a small part in today's solid breakout it only accounted for roughly 25% of the dynamic move witnessed in gold.
The dollar index did trade to a lower low, a lower high, and a lower close than yesterday's trading range. Currently, the dollar index is down by 0.44% and fixed at 109.505.
Spot gold is currently fixed at $1712.70 and had a larger price gain than December futures today gaining $37.20. According to the KGX (Kitco Gold Index) traders bidding the precious yellow metal higher accounted for $28.15 with the remaining gain of $9.05 directly attributable to dollar weakness.
On a short-term basis using a one-hour time cycle, we have added a Fibonacci retracement set beginning from the highs set at $1821 concluding at the triple bottom which resides at approximately $1621. The next level of resistance is at the 50% retracement from the data set detailed above at $1621.70. Above that is the 38.2% Fibonacci retracement at $1745.30.
Short-term support begins at the 61.8% Fibonacci retracement which occurs at $1698.10. Major support occurs at the 78% Fibonacci retracement at $1665.60.
Today's breach above $1700 per ounce was a combination of minor dollar weakness and according to many analysts technical buying based on gold's oversold pricing.
The real test will occur on Thursday, November 10 when the government releases its latest data on inflation vis-à-vis the CPI index for October.
The Federal Reserve Bank of Cleveland's "Inflation Nowcasting" is still predicting that the CPI index will reveal that inflation in October is still projected to come in at 8.09%. However, there has been a slight decline in the November estimates which moved from 8.09% yesterday to 7.99% today. Although it is a fractional decline it might give the Federal Reserve the conviction it needs to see recent rate hikes are beginning to take hold.
However, one possible explanation for today's swift gains is likely due to the mid-term elections taking place in the United States. Today's elections could have a profound effect on future fiscal actions of the House and Senate which could pressure the Federal Reserve's policy.
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Wishing you as always good trading,