Gold Price Futures (GC) Technical Analysis – Could Weaken if Trump Backs Dollar in State of the Union Speech

Gold futures rallied to its highest level since early September last week, driven by an extremely weak U.S. Dollar. The rally was fueled by dovish comments from a high-ranking U.S. Treasury official.

April Comex Gold futures settled at $1357.20, up $19.20 or +1.43%.

We could see volatility this week due to a plethora of key economic news. Early in the week, President Trump is going to give his first State of the Union speech. He’s likely to talk up the economy which could trigger a short-covering rally in the U.S. Dollar. This would drive gold prices sharply lower.

Traders will also have an opportunity to react to the latest the latest Fed monetary policy statement on Wednesday and the U.S. Non-Farm Payrolls report on Friday.

Weekly Swing Chart Analysis

The main trend is up according to the weekly swing chart. It was reaffirmed last week when buyers took out the main top at $1370.00. If the rally continues then the market may run into a series of former main tops at $1373.30, $1382.20 and $1396.20.

The short-term range is $1242.70 to $1370.50. If there is a correction then its retracement zone at $1306.60 to $1291.50 will become the primary downside target.

Weekly Swing Chart Forecast

The direction of the gold market this week will be determined by the direction of the U.S. Dollar. There is nothing else driving gold’s price action at this time.

A weaker U.S. Dollar should generate the upside momentum needed to challenge last week’s high at $1370.50 then the series of former tops ranging from $1373.30 to $1396.20.

A stronger U.S. Dollar will encourage gold longs to lighten up on their establish positions. New buyers are likely to pull their bids.

There is plenty of room to the downside if gold makes a normal correction. The nearest downside target is the retracement zone at $1306.60 to $1291.50. It may take a week to get there, or it may take several weeks. It all depends on the size of the rally in the dollar.

A bullish State of the Union speech from President Trump could be the catalyst behind a short-covering rally in the dollar, and a sell-off in gold.  Gold could also feel pressure from a hawkish Fed.