The reaction to the retracement zone located at $1981.70 to $2007.10 should set the tone for gold on August 18, 2021. That is quite important to the structure of the market. Gold futures rose on August 17 regaining some of the past week’s 4.5% plunge. Notably, the market has now recovered almost 62% of the recent top to bottom plunge.
Helping to enhance gold was a weaker US dollar, disappointing US economic data, and softer Treasury yields. Gains may have been significantly limited. But, ahead of Wednesday’s release of the minuted from the Fed’s July monetary policy meeting. On Monday, the December Comex gold settled at $1998.70, up 48.90, or +2.51%.
Taking a look at the data front, the New York Fed’s Empire State business conditions index dropped to 3.7 in August from 17.2 in July. That is quite far lower than the 15 points forecast earlier by a Reuters survey.
The key catalyst for gold traders might be the upcoming Fed minutes. Traders are keenly looking for any signs of a possible change to the Fed’s guidance at its next review in September. Signs of more dovish central bank policy may develop a spark required for further rallies.
Technical Analysis
The key trend is up based on the daily swing chart. A trade above $2089.20 will signal a resumption of the uptrend. Notably, the key trend will change to down on a move below the nearest swing bottom at $1874.20. The short term range is placed from $2089.20 to $1874.20.
Its retracement zone at $1981.70 to $2007.10 acted as the main upside target. On August 17, gold settled within that range. The wider range is $1690.10 to $2089.20 and its retracement zone formed at $1889.70 to $1842.60 and it managed to stop the selling pressure last week at $1874.20.
In the short term, trader reaction to the retracement zone located at $1981.70 to $2007.10 should set the tone in the coming days. The zone is quite important to the structure of the market.
It is expected that the aggressive counter-trend traders will try to stop the rally. They will try to form a potentially bearish secondary lower top. That may lead to an eventual change in trend to down.
On their part, the trend-trading buyers are going to try to take out the Fibonacci level at $2007.10. After that, they are going to try to establish some strong support at the retracement zone. A strong sustained move over this area will help solidify the importance of the new main bottom at $1874.20 and the main retracement zone at $1889.70 to $1842.60.
