Gold Price Futures (GC) Technical Analysis – Big Decision for Traders on Test of $1823.50 – $1810.20

Gold futures are down over 1% on Wednesday, dropping from yesterday’s two-week high as optimism over COVID-19 vaccine developments encouraged traders to take profits after a one-week counter-trend short-covering rally. Disappointment over the stalemate in fiscal stimulus negotiations also weighed on prices as well as a rebound in the U.S. Dollar against a basket of currencies.

At 17:48 GMT, February Comex gold is trading $1842.80, down $32.10 or -1.71%.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The main trend will change to up on a move through $1973.30. A move through $1767.20 will reaffirm the downtrend.

The minor trend is up. A trade through $1824.80 will change the minor trend to down. This will also shift momentum to the downside. A new minor top was formed at $1879.80 on Tuesday.

The short-term range is $1973.30 to $1767.20. Its retracement zone at $1870.30 to $1894.60 stopped the short-covering rally on Tuesday.

The new minor range is $1767.20 to $1879.80. Its retracement zone at $1823.50 to $1810.20 is the primary downside target.

The major support is the long-term retracement zone at $1780.50 to $1705.20. This zone stopped the selling at $1767.20 on November 30.

Short-Term Outlook

We expect the downside momentum to be strong enough to drive the gold market into $1823.50 to $1810.20. Trader reaction to this zone will determine the near-term direction of the market.

Counter-trend buyers could come in on a test of $1823.50 to $1810.20. They are going to try to form a potentially bullish secondary higher bottom. If successful, this move could lead to an eventual change in trend to up.

On the bearish side, taking out the lower or Fibonacci level at $1810.20 will indicate the selling is getting stronger. This could lead to a test of the major retracement zone at $1780.50 to $1705.20.

Currently, the market still looks bearish because of the renewed selling pressure following the test of $1870.30 to $1894.60.  This is an early indication that a new secondary lower top is forming. Counter-trend buyers would have to overcome $1894.60 to get excited about the upside.