Gold futures are trading lower on Monday but well off its intraday low following a more than 4% plunge earlier in the session that took the market to its lowest level since April 2020. The move was fueled by aggressive short-sellers and the triggering of massive sell-stops in reaction to strong U.S. labor market data released on Friday that bolstered expectations for early tapering of economic support.
At 11:18 GMT, December Comex gold is trading $1746.50, down $16.60 or -0.94%. This is up from an intraday low of $1677.90.
The “technical bounce” suggests the sell-off was overdone, making prices extremely cheap given the current fundamentals. Furthermore, it may have helped identify a value zone. So it’s not all about “doom and gloom” like some gold analysts want you to believe.
Gold still has value. It didn’t just suddenly turn bearish. It topped nearly a year ago and it had been in a downtrend before the Non-Farm Payrolls report was released on Friday. So where’s the surprise? One only has to look at the daily chart to see that under the month-long support base there was not “real support” until $1754.50. And under that level there was no “real support” until $1683.00 to $1678.00.
Finding real support and real value is the key. Not trading made up numbers like moving averages.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. A trade through $1677.90 will signal a resumption of the downtrend. A move through $1837.50 will change the main trend to up.
The market is currently trading inside the future contract’s retracement zone at $1795.00 to $1716.00. It’ a wide range so prices could remain inside this area for weeks as traders await the Federal Reserve’s next decision on tapering.
The new short-term range is $1837.50 to $1677.90. Its retracement zone at $1757.70 to $1776.50 is potential resistance. After the steep break, the market snapped back to $1754.00.
Daily Swing Chart Technical Forecast
After hitting an intraday low of $1677.90 the market rallied back to $1754.00. If this range holds then look for a possible pullback into its 50% level at $1716.00. This is also the long-term Fibonacci level so we could see support form at this support cluster of the short-term.
On the upside, since the main trend is down, we’re anticipating new short-sellers to come in at $1757.70 to $1776.50. If the buying is strong enough to overtake $1776.50 then look for the rally to possibly extend into the next resistance cluster at $1795.00 to $1800.60.
Gold is one of the best markets to trade when the newsletter writers, who are nearly always bullish, throw in the towel after a steep break. Watching these guys turn bearish is often a great contrarian buy signal. Even if it’s only a day-trade or short-term counter-trend move.
Also, if you’re going to trade gold then don’t look at it in terms of bullish or bearish, but where you can find value.