Gold Appears to be Consolidating and Forming a Base, with Resistance at 100-Day M.A.


Although gold traded higher over the last two days, gains have been fractional at best. Today gold futures basis, the most active August 2021 Comex contract, gained one dollar and is fixed at $1778.80. Gold has traded above a key and critical technical level right around $1767, which is based upon two distinctly different data sets used to create the retracements.

The first is an extremely long data set that begins at the lows of March 2020 when gold was trading at $1467 and concludes at the record high of $2088, which occurred in August of last year. The recent lows that have occurred following gold’s decline from $1920 are just above the 50% retracement level of this extremely long data set. The second data set is much shorter, beginning at the lows of the double bottom, which occurred in March of this year at $1672 and concluded at the beginning of June when prices traded to a high of $1920.

This shorter data set, along with the longer data set are indicating a Fibonacci harmonic’s, which we defined as a price point in which two data sets revealed the same price point at a key level. In the case of the shorter data set, the recent decline from the highs at $1920 occurs at a 61.8% Fibonacci retracement level at $1767. Chart 1 clearly shows how these two different data sets intersect at one price point.

The second chart (chart 2) clearly defines current resistance, which is the 100-day moving average. Ever since market forces took gold from $1920 to an intraday low of $1765 on June 18, all of the intraday highs in gold came in just around the 100-day moving average which is currently fixed at $1792.10.

A case can be made for the inverse correlation between the U.S. dollar and gold in terms of recent price action which can be seen in the chart above (chart 3). However, the price decline which began after gold achieved a high of $1920 on the first day of June and traded lower was also largely attributable to market participants actively selling the precious yellow metal.

Much of the recent action in gold which has been lackluster at best, can be attributed to the dynamic moves in U.S. equities, coupled with the lower volume which is attributable to the summer months.

The lackluster performance of gold over the last five trading days cannot be attributed to market participants waiting upon the monthly U.S. jobs report which will be released on Friday of this week. The U.S. dollar had only fractional gains today trading up 0.06%. Gold gained the same percentage 0.06%.

According to CNBC, the U.S. Labor Department’s jobs report is expected to come in indicating 690,000 jobs again in June, compared with 559,000 jobs in May. The unemployment rate is projected to come in at 5.7% versus 5.8% the previous month. These projections are based upon a Reuters poll of economists.

One economist is projecting a surprise upside spike according to CNBC, “Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto. “The potential for an upside surprise (in the U.S. jobs data) that pulls monetary tapering and tightening expectations forward is looming ever bigger for investors.”

The actual numbers released on Friday will be key in reflecting the next big move in gold pricing. A strong U.S. jobs report would pressure gold lower, and inversely if the numbers come in below the current projected estimates, we could see gold trade higher and break above the 100-day moving average.

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Wishing you, as always, good trading and good health,

Gary S. Wagner

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