December Gold Futures Can’t Break From 1900.0

Posted Thursday, October 22, 2020 by
Shain Vernier • 2 min read

Following a strong three-day winning streak, December gold futures are seeing heavy bearish action. At press time, values are off more than $25 per ounce or about 1.5%. Today’s selloff in bullion is a bit of a surprise, but likely due to improving U.S. employment metrics.

The bulk of gold’s intraday plunge developed after the release of this morning’s weekly employment reports (8:30 AM EST). Here’s a quick look at the jobs numbers:

Event                                                            Actual                Projected           Previous

Continuing Jobless Claims (Oct. 9)           8.373M                9.500M              9.397M

Initial Jobless Claims (Oct. 16)                   787K                      860K                   842K

In short, the U.S. labor market is improving. Jobless claims beat expectations and the previous release ― both are positive economic signs. On the real estate front, Existing Home Sales (MoM, Sept.) came in at 6.54 million, above expectations (6.30M) and the previous release (5.98M). The rally in home sales is largely due to record-low mortgage rates, promoted by the FED’s COVID-inspired policy of unlimited quantitative easing.

So far today, gold is the big loser. Let’s dig into the technicals and see where this market may be heading.

December Gold Futures Back At 1900.0

This morning’s intraday bearish action in GOLD may be largely attributed to a rally in the USD. The Greenback is up significantly vs the Euro, JPY, and CHF, paring yesterday’s losses. For December gold futures, values are holding just above the 1900.0 threshold.

December Gold Futures (GC), Daily Chart
December Gold Futures (GC), Daily Chart

As we move toward the final trading week of October, there will be one key level on my radar:

  • Support(1): Double Bottom, 1851.0-1851.1

Bottom Line: If we see December gold futures continue to struggle, a long trade may come into play from the daily Double-Bottom. Until elected, I’ll have buy orders in the queue from 1852.6. With an initial stop loss at 1848.6, this trade produces 40 ticks on a standard 1:1 risk vs reward management plan.

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