After adopting a wait-and-see attitude all week, buyers returned to the gold market on Thursday, driving prices higher during a volatile trading session. The market is recovering nicely from early session weakness. Although inflation is running hotter than expected, the price action suggests investors think it’s temporary and likely won’t affect Federal Reserve policy yet.
At 19:50 GMT, August Comex gold is trading $1900.50, up $5.00 or +0.26%. This is up from an intraday low of $1871.80.
The U.S. consumer price index rose 5% in May on a year-over-year basis, the highest since the summer of 2008, when oil prices were skyrocketing. Excluding food and energy, core CPI rose 3.8% year over year, the highest pace since 1992.
A third of the increase was attributed to a sharp 7.3% increase in used car and truck prices. Economists said that this could be a sign that rising prices could be temporary since they are centered in areas impacted by the pandemic.
Daily Swing Chart Technical Analysis
The main trend is down according to the daily swing chart. A trade through $1919.20 will change the main trend to up. A move through $1855.60 will signal a resumption of the downtrend.
The minor trend is also down. A trade through $1906.90 will change the minor trend to up. This will also shift momentum to the upside.
The major resistance is the long-term retracement zone at $1899.20 to $1951.30. Gold is currently testing the lower or 50% level at $1899.20.
The minor range is $1854.40 to $1919.20. Its 50% level at $1886.80 is potential support.
The short-term range is $1810.70 to $1919.20. Its 50% level at $1865.00 is potential support.
The direction of the August Comex gold market over the short-run is likely to be determined by trader reaction to the major 50% level at $1899.20.
A sustained move over $1899.20 will indicate the presence of buyers. Taking out the minor top at $1906.90 will indicate the buying is getting stronger. This could trigger a surge into the main top at $1919.20. This is a potential trigger point for an acceleration into the long-term Fibonacci level at $1951.30.
A sustained move under $1899.20 will signal the presence of sellers. This could lead to a test of the minor 50% level at $1886.80.
Buyers could come in on the first test of $1886.80, but if it fails, prices could plunge into Thursday’s low at $1871.80, followed by the 50% level at $1865.00 and the main bottom at $1855.60.