Gold Price Futures (GC) Technical Analysis – Trading on Strong Side of Steep Uptrending ChannelBased on the early price action and the current price at $1651.20, the direction of the April Comex gold contract into the close will be determined by trader reaction to the steep uptrending Gann angle at $1639.12.
Gold futures are trading sharply higher late Friday, hitting its highest level in seven years as investors aggressively bought the precious metal due to concerns over slowing global economic growth due to the fast-spreading coronavirus.
After adding to this week’s earlier gains shortly after the regular session opening, the market surged to its high of the day after a survey of purchasing managers showed U.S. business activity in the manufacturing and services sectors stalled in February as companies have grown increasingly concerned about the coronavirus. The news weakened the U.S. Dollar, which drove up demand for dollar-denominated gold.
At 18:52 GMT, April Comex gold is trading $1651.20, up $30.70 or 1.90%.
Try to avoid thinking of gold as a safe-haven asset. It’s an investment and even though it doesn’t pay you anything to hold it, it could become a more valuable asset if the central banks start slashing rates to stimulate their respective economies. This will be especially true if rates fall below 0%. A bond that pays negative interest is worth less than an asset that pays nothing.
Daily Technical Analysis
The main trend is up according to the daily swing chart. The uptrend was reaffirmed when buyers took out yesterday’s low earlier in the session. The main trend will turn down if sellers take out the last swing bottom at $1564.40. This is highly unlikely today.
If you’re looking to pick a top because of a technical overbought indicator then good luck. They are useless. Furthermore, they are coincidental indicators. Markets don’t become overbought because they reach a certain number. They become overbought when investors stop buying.
The best indication of a short-term top will be a closing price reversal. This pretty reliable chart pattern doesn’t change the trend to down, but it does indicate the selling is greater than the buying.
Daily Technical Forecast
Based on the early price action and the current price at $1651.20, the direction of the April Comex gold contract into the close will be determined by trader reaction to the steep uptrending Gann angle at $1639.12.
For the past six sessions, April Comex gold has been trading inside a steep uptrending channel. On Friday, it broke out to the bullish side of the channel. This angle is new support at $1639.10. A sustained move above this angle, moving up at a rate of $8.00 per day, will indicate the buying is getting stronger.
Falling back below the uptrending Gann angle at $1639.10 will be the first sign of weakness. Turning lower for the session will be another sign of increasing selling pressure. The next target is the bottom of the uptrending channel at $1612.40.
There is no upside objective at this time since the rally is momentum driven.
A close under $1622.30 will form a potentially bearish closing price reversal top. This won’t change the trend to down, but it could trigger the start of a 2 to 3 day counter-trend break.