December Comex Gold futures surged on Tuesday as investors reduced expectations that the U.S. Federal Reserve will increase interest rates in September. According to the CME Group’s FedWatch tool, traders assigned a 15% likelihood of the Fed raising rates by September, down from 18% earlier in the week.
Also helping to support the gold market was a steep sell-off in U.S. equity markets. Gold tends to rally when stocks break sharply because they are competing assets. In addition, when investors take profits in stocks, they like to park the proceeds into gold.
Gold was also boosted by an interest rate cut by the Reserve Bank of Australia. The central bank made the move in reaction to record-low inflation and a slowing jobs market. Investors are now looking for the Bank of England to cut rates and inject more stimulus. This could be supportive for gold prices.
Technically, the main trend is up according to the daily swing chart. A trade through $1384.40 will signal a resumption of the uptrend. A trade through $1318.50 will turn the main trend to down.
Based on the close at $1372.60, the first upside targets and potential breakout levels are downtrending angles at $1374.40 and $1379.40. The latter is the last potential resistance angle before the $1384.40 main top.
On the downside, the first support angle comes in at $1267.10. This is followed by a short-term uptrending angle at $1354.50.
Watch the price action and read the order flow at $1374.40. Trader reaction to this angle will set the tone for the day.