Gold encounters resistance at $1918 but remains above $1900

Gold prices oscillated between today’s low of $1889.70 and high of $1918.30. As of 4:15 PM, gold futures basis's the most active April contract is currently fixed at $1901.30 after factoring in today’s gain of $1.50 or 0.07%. This article will focus upon today’s high as it occurs at a key level of possible strong resistance. Historical data has shown this price point is important in both short and long-term studies as evidence that $1920 is a key technical level that remains in play.

Chart number one looks at gold from August 2020 reaching its record high to the correction that followed. After trading to the record high of $2088, gold began to a steep price decline taking gold from the record high to a low of approximately $1675 in March 2021. What followed was a clear and defined range with highs defined at $1920 and a low of $1670. There have been two instances since gold declined from $2088 when gold traded to a high of $1920. The first occurrence was in June 2021 with today’s high marking the second occurrence.

Chart number two is a long-term weekly chart highlighting the first occurrence of gold reaching a value above $1900. This occurred In the middle of 2011 as a direct result of quantitative easing by the Federal Reserve to revitalize the economy after the recession of 2009. Because it was a new record high and the long at attracted correction that followed this price remains a strong technical area that is currently acting as resistance but could become support once that price is taken out. This is why we believe that today’s high price could be a technical level where gold encounters significant resistance.

Chart number three is a daily candlestick chart of gold futures highlighting the current rally which began in the last days of January when gold traded to a low of $1778 and gained almost $140 in under one month.

The price advance in gold was initially brought about by spiraling levels of inflation reaching a 40-year high. The most recent CPI index report indicated that inflation in January rose to 7.5% the highest level of inflation since 1982. More recently we have seen geopolitical tensions between Russia and Ukraine combined with inflationary concerns take gold to the highs achieved today.

It will be the outcome of the current geopolitical tensions between Ukraine and Russia as well as inflationary concerns that will continue to be highly supportive of gold prices. However, as seen in recent rises in U.S. debt instruments market participants are currently factoring in an extremely aggressive Federal Reserve as they begin a series of rate hikes in attempts to stave off and reduce the current level of inflation. This will create bearish undertones for gold as it reacts to higher levels of interest rates.

By Gary Wagner

Contributing to kitco.com

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Gold has modest recovery, closing at $1800 in New York

Gold regained a price above a key phycological level when it closed at $1800, up +0.4% in New York. As of 5:10 PM EDT gold futures basis, the most active December 2021 Comex contract was trading up $2.80 (+0.16%) and fixed at $1796.30. The precious metal traded to a high today of $1803.40 and a low of $1785.10. This is the first instance in the last three trading days in which gold has closed higher when compared to the previous day and traded to a higher low but a lower high. Silver futures basis the most active December contract traded fractionally higher, gaining approximately $0.03 (+0.12%) and is currently fixed at $24.085.

The modest recovery in gold and silver was largely a result of dollar weakness. The U.S. dollar index is currently fixed at 92.49 after factoring in today's decline of -0.17%, or 16 points. However, gold prices declined fractionally for those using other currencies, specifically the Euro, which had fractional gains after the European Central Bank announced that it would slow down its current pace of asset accumulation (Euro bonds).

According to Reuters, "Gold firmed on Thursday, lifted by a slight retreat in the dollar, but renewed bets that the U.S. Federal Reserve may start early tapering of economic support capped gains, with the European Central Bank also slowing its bond-buying."

Last Friday's jobs report for the month of August came in exceedingly below expectations (economists predicted that over 700,000 jobs would be added to August payrolls), CNN reported that only 235,000 jobs were added back to the economy last month. However, the U.S. weekly jobless claims came in near an 18-month low. This could persuade the Federal Reserve to announce tapering their asset purchases before the end of the year.

Ed Moya, a senior market analyst at foreign exchange brokerage Oanda, told Reuters that, "U.S. weekly jobless claims data came in at near 18-month lows, which cements the belief that a December (Fed) taper announcement was possible. … So, gold prices are going to consolidate around these levels." He added, "The increased likelihood that the ECB may start reducing stimulus at some point next year drove gold's initial decline back below $1,800 per ounce."

When the Federal Reserve meets on September 21 for the next FOMC (Federal Open Market Committee) meeting, they most certainly will take into account the weak jobs report from August and the current state of the Delta variant as it pertains to slowing down the economic recovery in the United States.

According to CNN, "Covid-19 cases have been on the rise in much of the U.S., and the rise in hospitalizations continues in hotspots throughout the country. Children now represent more than a quarter — or 26.8% — of weekly Covid-19 cases nationwide." Today it was reported that in the United States, there were 104,887 new confirmed cases, taking the daily average to 151,816. This recent surge in new cases prompted President Biden to address the nation, outlining a six-step plan to get the pandemic under control.

Because the pandemic is still impacting our economic recovery, it will be a major subject discussed during the next FOMC meeting.

By Gary Wagner

Contributing to kitco.com

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