Gold Price Futures (GC) Technical Analysis – Could Be Setting Up Bearish Closing Price Reversal Top

Gold futures are trading lower at the mid-session may be vulnerable to a near-term correction of $30 or more if Treasury yields continue to rise along with demand for higher risk assets. Furthermore, a stronger U.S. Dollar is likely to trigger a drop in demand for the dollar-denominated asset.

I recently warned about chasing the market higher because I suspected that all it was going to take was the U.S. and China saying the trade negotiations were set to resume to bring in the sellers. On Tuesday, the Chinese Commerce Ministry said in a post that the “differences and frictions between the two sides” should be dealt with through talks. It wasn’t the announcement of new trade talks, however, it was just enough to encourage profit-taking after an early rally.

At 16:04 GMT, August Comex gold is trading $1327.30, down $0.60 or -0.05%.

Daily Technical Analysis

The main trend is up according to the daily swing chart. However, the market is threatening to form a potentially bearish closing price reversal top which could bring an end to the rally. If formed then confirmed, we could see a 2 to 3 day correction of 50% to 61.8% of the short-term rally.

A trade through $1334.10 will signal a resumption of the uptrend. A move through $1335.70 will reaffirm the uptrend. This could even trigger a breakout to the upside with $1361.50 the next target.

The trend will change to down on a trade through $1274.60. However, this is highly unlikely today. What is possible is a closing price reversal top, or a close below $1327.90.

The long-term range is $1413.30 to $1202.00. Its 50% to 61.8% retracement zone is $1307.70 to $1332.60. Today’s rally stopped just slightly above the upper or Fibonacci level at $1332.60.

The short-term range is $1274.60 to $1334.10. Its retracement zone at $1304.40 to $1297.30 is a potential downside target.

The combination of the two zones creates a 50% support cluster at $1307.70 to $1304.40.

Daily Technical Forecast

Based on the early price action, the direction of the August Comex gold futures contract into the close is likely to be determined by trader reaction to yesterday’s close at $1327.90.

Bullish Scenario

Look for a bullish move into the close if buyers can sustain a move over $1327.90. This could trigger a move into the Fib level at $1332.60, the intraday high at $1334.10 and the main top at $1335.70. This is followed by a downtrending Gann angle at $1343.50.

Bearish Scenario

A sustained move under $1327.90 will indicate the presence of sellers. The first target is a downtrending Gann angle at $1325.50. This is a potential trigger point for an acceleration to the downside with the next target angle coming in at $1310.60.

If $1310.60 fails as support then look for the selling to possibly extend into the 50% support cluster at $1307.70 to $1304.40.