Based on gold futures, the most active December contract opened in trading today at $1678. After trading at $1,667, December gold broke sharply above its 50-day moving average in one hour. The first trading hour in New York included almost the entire gold trading area.
Hourly gold rose $35 from the New York open ($1678.0 and an hour later $1716.90. During the six hours following gold’s dynamic rally, gold strengthened in a very narrow range to $1720.40. and bottomed at $1712 with little volatility after the dynamic swing.
As of 4:43 PM EST December futures are currently flat 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 accounted for only about 25% of gold’s dynamic movement.
The dollar index traded lower, higher and lower in yesterday’s trading range. Currently, the dollar index is down 0.44% and is fixed at 109.505.
Spot gold is currently flat at $1,712.70, a bigger gain than December futures’ $37.20 gain today. According to the KGX (Kitco Gold Index), traders who bid the precious yellow metal higher were $28.15, with the remaining $9.05 in gains directly attributable to the weaker dollar.
In the short term, on the one-hour time frame, we have added a Fibonacci retracement series that starts at the highs of $1821 and ends with a triple bottom around $1621. The next resistance level is the 50% retracement of the data set described above at $1621.70. Above it is the 38.2% Fibonacci retracement at $1745.30.
Short-term support starts at the 61.8% Fibonacci retracement at $1698.10. The biggest support is found at the 78% Fibonacci retracement at $1665.60.
Today’s break above $1,700 an ounce was due to a slight weakening of the dollar and, according to many analysts, technical buying based on oversold gold pricing.
The real test will take place on Thursday, November 10, when the government publishes its latest data on inflation in relation to the consumer price index for October.
The Federal Reserve Bank of Cleveland’s “Inflation Nowcasting” continues to forecast that the CPI reveals that October inflation is still forecast to be 8.09%. However, there has been a slight decrease in the November estimates, which rose from yesterday’s 8.09 percent to today’s 7.99 percent. While the bill is a fraction, it could give the U.S. Federal Reserve the reassurance it needs to see recent rate hikes begin to take hold.
However, one possible explanation for today’s rapid rise is likely due to the US midterm elections. Today’s election could have a profound impact on future fiscal policy actions by the House and Senate, potentially putting pressure on Federal Reserve policy.
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As always I wish you good trading,
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