Gold Price Futures (GC) Technical Analysis – Bullish but Needs to Hold $1611.80 to Sustain Short-Term RallyBased on the early price action and the current price at $1617.70, the direction of the April Comex gold market the rest of the session on Thursday is likely to be determined by trader reaction to $1611.80.
Gold prices are trading higher on Thursday shortly after the regular session opening. Despite the early strength, the upside momentum doesn’t appear to be as strong as it was on Tuesday and Wednesday. Furthermore, it is showing little reaction to the slight drop in U.S. Treasury yields and the weaker U.S. equity markets.
At 14:18 GMT, April Comex gold futures are trading $1617.70, up $5.90 or +0.37%.
The longer-term outlook for gold will be bullish as long as governments and central banks continue to try to pump up their economies with stimulus and low interest rates. However, over the short-run, the price action is going to continue to be influenced by the Laws of Trading. Meaning they’ll go down when the buying stops and the profit-taking starts, and up when the buyers step back in when they see value.
The early price action suggests this leg of the rally may have run its course, but we may not know for sure unless a closing price reversal top forms. A short-term top will not mean the trend is changing. But it will indicate that buyers got tired of chasing the market higher and may be looking to reenter at lower price levels.
Daily Technical Analysis
The main trend is up according to the daily swing chart. The uptrend was reaffirmed when buyers took out the January 8 main top at $1619.60. Breaking back below this top indicates the breakout was likely fueled by buy stops rather than new buyers. This could be the first sign of weakness.
The main trend will change to down on a trade through $1564.40. This is highly unlikely, however, a break back under yesterday’s low at $1611.80 will put the market in a position to form a closing price reversal top.
Based on the early price action and the current price at $1617.70, the direction of the April Comex gold market the rest of the session on Thursday is likely to be determined by trader reaction to $1611.80.
A sustained move over $1611.80 will indicate the presence of buyers. If this move continues to generate enough upside momentum then we could see a retest of the intraday high at $1621.60. Taking out this level could drive the market into the next upside target zone at $1629.90 to $1719.10.
A sustained move under $1611.80 will signal the presence of sellers. If this move creates enough downside momentum then look for a pull back into the steep uptrending Gann angle at $1604.40.
Watch for a technical bounce on the first test of $1604.40. If it fails then look for a potential acceleration to the downside with $1592.00 to $1591.10 the next likely downside target.