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Gold trades to a double top at $1825

Commentaries & Views

Chairman Powell’s speech on Wednesday, November 30 caused extreme volatility leading to a dynamic price spike that took gold futures to an intraday high of $1817 on Thursday, December 1. On Friday, December 2 gold futures traded to the same intraday high but closed lower on the day at approximately $1809.

Market participants immediately reacted to Powell's speech by focusing on the fact the Federal Reserve was planning to slow the pace of interest-rate hikes. However, today they seemed to disregard Powell’s remarks about how the Federal Reserve would slow the pace of rate hikes. They changed their focus to the fact that the Federal Reserve is maintaining an extremely hawkish demeanor with more rate hikes at a slower pace. In other words, market participants focused on the time it would take the Federal Reserve to lower inflation to its target rate rather than the fact that the Fed intends to slow down the size of individual rate hikes.

Gold futures opened today at $1810.50 and traded to a high of $1822.90 before sellers combined with dollar strength took prices dramatically lower. Technical selling moved gold prices lower as traders recognized today’s high as a double top which occurs from the high created during the first week of August at $1825 and today’s intraday high of $1823.

Important technical levels in gold futures

Our technical studies indicate that the resistance area that we identified last week at $1825 proved to be resistance at least in the short term. This created a double top. It resulted in a breach of the former support level between $1790 and $1802. Our new support levels are based upon a Fibonacci retracement of the rally that began on November 3 at $1619 per ounce to today’s high of $1822.90. Minor support first occurs at $1775 which corresponds to the 23.6% Fibonacci retracement. Major support occurs between $1720 the 50% retracement and $1745 the 38.2% Fibonacci retracement level.

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Wishing you as always good trading,

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