Chairman Powell’s speech on Wednesday, November 30th, caused extreme volatility that resulted in a dynamic price surge that took gold futures to an intraday high of $1817 on Thursday, December 1st of the day about $1809.
Market participants immediately responded to Powell’s speech by focusing on the fact that the Federal Reserve plans to slow the pace of interest rate hikes. Today, however, they seemed to ignore Powell’s comments about how the Federal Reserve would slow the pace of rate hikes. They shifted their focus to the fact that the Federal Reserve maintains an extremely hawkish stance with further rate hikes at a slower pace. In other words, market participants focused on the time it would take for the Federal Reserve to bring inflation down to its target rate, rather than the fact that the Fed intends to slow the magnitude of individual rate hikes.
Gold futures opened at $1,810.50 today and traded to a high of $1,822.90 before sellers combined with dollar strength pushed prices lower dramatically. Technical selling pushed gold prices lower as traders recognized today’s high as a double top occurring from the high of $1,825 set in the first week of August and today’s intraday high of $1,823.
Key Technical Levels in Gold Futures
Our technical studies show that the resistance area we identified last week at $1825 has proved to be resistance, at least in the short term. This created a dual leadership. This led to a break of the previous support level between $1790 and $1802. Our new support levels are based on a Fibonacci retracement of the rally that started at $1,619 an ounce on November 3rd to today’s high of $1,822.90. Minor support first appears at $1775, which is the 23.6% Fibonacci retracement. The main support lies between $1,720, the 50% retracement level, and $1,745, the 38.2% Fibonacci retracement level.
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