Gold futures edged higher on Thursday on low volume ahead of the long Christmas holiday weekend. The precious metal was underpinned by a weaker U.S. Dollar and strong demand for riskier assets. Gains were likely capped by firm U.S. Treasury yields.
Easing fears over a fallout from the Omicron coronavirus variant is encouraging investors to shed hedge positions in the safe-haven U.S. Treasurys and the U.S. Dollar.
The selling of Treasurys is helping to firm yields, which typically support a higher U.S. Dollar. But not at this time because investors are liquidating dollars they bought as safe-haven protection against potential economic damage from the rapidly spreading Omicron variant.
I don’t think we’re seeing the start of a new leg higher in gold, but rather position-squaring in reaction to the move in the dollar. Once the dollar hedges are lifted, the greenback is likely to resume its rally, putting pressure on gold prices.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. A trade through $1815.70 will reaffirm the uptrend. A move through $1785.00 will change the main trend to down.
The minor range is $1815.70 to $1785.00. On Thursday, the market closed on the strong side of its pivot at $1800.40, making it support.
The short-term range is $1753.00 to $1815.70. Its retracement zone at $1784.40 to $1777.00 is support.
The major support is $1781.00 to $1757.10. When combined with the short-term retracement zone, it forms two support clusters at $1784.40 – $1781.00 and $1781.00 – $1777.00.
Another short-term range is $1881.90 to $1753.00. Its retracement zone at $1817.50 to $1832.70 is the next upside target. This zone is controlling the near-term direction of the market.
The near-term direction of the February Comex gold futures market is likely to be determined by trader reaction to $1817.50 to $1832.70.
The daily chart shows the way of least resistance will be up if buyers can clear $1832.70 and sustain the move. There will be no resistance until the November 16 main top at $1881.90.
A failure at $1817.50 will indicate the presence of sellers. This could lead to a labored break with potential targets a minor pivot at $1800.40, and a major support cluster at $1785.00 to $1777.00.
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This article was originally posted on FX Empire