Gold Price Futures (GC) Technical Analysis – Close Below Major Retracement Zone Indicates Weakness

Gold futures are trading higher shortly before the close on Friday, but also in a position to finish lower for the week. Buyers came in early in the session as the market neared its low for the year. This triggered an intraday short-covering rally that was stopped by short-term retracement zone resistance.

The direction of the market continues to be controlled by the U.S. Dollar and risk appetite. Helping to keep a lid on gold prices on Friday were a rise in the U.S. Dollar Index to its highest level since March 8, a two-day rise in Treasury yields and a strong stock market which is in a position to finish on its high for the week.

At 20:07 GMT, June Comex gold is trading $1296.80.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through $1287.50 will signal a resumption of the downtrend. The main trend will change to up on a move through $1330.80.

The long-term retracement zone is $1299.80 to $1325.90. This is the retracement zone of the contract’s range. Trader reaction to this zone will determine the longer-term direction of the market.

On the downside, the next major retracement zone support is $1272.70 to $1253.00. Based on the current price action, this zone should become the primary downside target.

The main range is $1256.00 to $1287.50. Its retracement zone at $1321.80 to $1329.80 provided resistance earlier in the week, stopping a rally at $1330.80. The long-term Fibonacci level at $1325.90 fell inside this retracement zone.

The short-term range is $1287.50 to $1330.80. This zone stopped the rally on Friday and should be considered resistance.

Daily Swing Chart Technical Forecast

Based on Friday’s price action, it looks as if buyers came in at $1291.30 to defend the main bottom at $1287.50. This spooked a few of the weaker shorts enough to trigger an intraday short-covering rally.

Clearly, the next major move in gold will be determined by trader reaction to $1287.50.

Bullish Scenario

Continuing to hold $1287.50 will indicate the presence of buyers. However, any rally is likely to be labored because of a series of retracement levels at $1299.80, $1304.00 and $1309.20.

Taking out $1309.20 will indicate the buying is getting stronger. This could trigger a further rally into the next series of retracement levels at $1321.80, $1325.90 and $1329.80.

Bearish Scenario

A sustained move under $1287.50 could trigger a steep decline with the primary downside target the retracement zone at $1272.70 to $1253.00. This is likely to occur if a U.S.-China trade deal is announced.