4 min read Gold dropped sharply on Tuesday after hotter than expected US inflation data and hawkish comments from a Federal Reserve governor lifted the dollar and Treasury yields, with markets now weighing the chance of a larger rate hike in December. The metal lost close to 3% on the day and tested the $4,000 area before buyers stepped in, and it is trading slightly higher this morning in thin holiday conditions.
Gold daily chart: range lows reclaimed, for now
In our last gold article we noted that a break below the range low could potentially lead to a deeper correction. Gold did initially break to the downside at the end of October, and the next major support area on the chart sits far lower, in the $3,300 region. That move has not followed through so far, as price has reclaimed the $4,000 area and is still holding the range lows. The open question on this timeframe is whether this could be the start of a recovery, a temporary bounce, or a pause before continued weakness.
Gold daily chart. Price is back inside the range after the initial break below the $4,000 area, with the next major support area marked far below.
Gold 1 hour chart: three areas and two paths
On the 1 hour chart, gold has been trading in a short term range since last week, and three horizontal areas stand out. Range low support sits around $4,030, the range EQ area sits around $4,090, and the range high sits around $4,140. Tuesday’s sell off took price from the range high down into range low support, where it appears to have found buyers.
If the current move continues, the first test could come at the range EQ area around $4,090. A rejection there could send gold back down to range low support, and if that support gives way, a move towards the $4,000 area and a break of the range low could follow, which would put the daily range lows back under pressure. If gold instead reclaims range EQ, the path could potentially open towards the range high around $4,140.
Gold 1 hour chart. The arrows show the two potential paths from range EQ, a rejection back towards $4,000 or a reclaim towards the range high.
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