Gold futures are inching higher late in the session on Friday after giving up all of its earlier gains. The market rose earlier in the session and was up more than $30.00 before sellers came in.
Prices rose sharply higher as concerns over the spread of a newly identified coronavirus variant boosted the metal’s safe-haven appeal. The move was primarily driven by a steep plunge in Treasury yields and a weaker U.S. Dollar.
The early rally and the steep drop were likely the result of thin post-holiday trading conditions. We may not see the real reaction to the new virus variant threat until next week when the major traders return.
The big issue for gold investors is whether a new COVID-19 outbreak will encourage central banks, especially the Federal Reserve, to delay any plans to reduce stimulus or raise interest rates.
The main trend is up according to the daily swing chart. However, momentum has been trending lower since the formation of the closing price reversal top on November 16.
A trade through 1881.90 will negate the closing price reversal top and signal a resumption of the uptrend. A move through $1761.00 will change the main trend to down.
The main range is $1680.00 to $1881.90. Its retracement zone at $1781.00 to $1757.10 is a potential value zone. Since the main trend is up, buyers are likely to come in on a test of this zone. On Wednesday, this zone stopped the selling at $1780.20.
On the upside, the first resistance is a minor pivot at $1821.50.
The short-term range $1881.90 to $1780.20. Its 50% level at $1831.10 is a potential upside target.
Daily Swing Chart Technical Forecast
The direction of the February Comex gold futures contract into the close on Friday is likely to be determined by trader reaction to $1781.00.
A sustained move over $1781.00 will indicate the presence of buyers. If this move creates some late session momentum then look for the rally to possibly extend into the pivot at $1802.80.
Overtaking $1802.80 will indicate the buying is getting stronger. This could trigger a further rally into the intraday high at $1819.30, followed by a pivot at $1821.50 and the short-term 50% level at $1831.10.
A sustained move under $1781.00 will signal the presence of sellers. Taking out this week’s low at $1780.20 will indicate the selling pressure is getting stronger. This could trigger a steep break into the main bottom at $1761.00, followed by the main Fibonacci level at $1757.10.
Since the main trend is up, don’t be surprised if buyers show up on a test of $1781.00 to $1757.10.
James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.