Gold Price Futures (GC) Technical Analysis – Direction Rests on Mnuchin Clarification, Draghi Comments

April Comex Gold futures surged on Wednesday in reaction to a huge drop in the U.S. Dollar. The catalyst behind the price action was a comment from U.S. Treasury Secretary Steven Mnuchin. He “jawboned” the greenback by saying he “welcomed” a weaker U.S. Dollar.

“Obviously a weaker U.S. Dollar is good for us as it relates to trade and opportunities,” Mr. Mnuchin told reporters at the Davos Forum.

Traders are now saying that Mnuchin may have been misquoted. Gold prices could retreat if he softens his comments later today in a panel discussion at the WEF in Davos.

Daily Swing Chart Analysis

The main trend is up according to the daily swing chart. The trend was reaffirmed early Wednesday when buyers took out the previous top at $1349.20. If the upside momentum continues then we could see a test of the September 8 top at $1370.00.

The main trend will change to down on a move through $1329.10. Today’s session also begins with gold in the window of time for a possible closing price reversal top.

The main range is $1370.00 to $1242.70. Its retracement zone at $1321.40 to $1306.40 is new support.

Daily Swing Chart Forecast

Yesterday’s high was $1366.80. Gold reached this high because it was underpinned by an extremely weak dollar due to negative comments from U.S. Treasury Secretary Steven Mnuchin. Some traders believe Mnuchin may have been misquoted.

Mnuchin will get a chance to clarify his comments early Thursday. If he softens his tone toward the dollar then it may strengthen. This should put pressure on gold prices. If he reiterates his call for a weaker dollar then gold should challenge or perhaps breakout out above $1370.00.

Gold traders will also react to the European Central Bank’s monetary policy statement and comments from ECB President Mario Draghi. This news should also influence the direction of the dollar.

Ultimately, the direction of the gold market will be determined by the direction of the dollar. We’re still in a weak dollar/strong gold, strong dollar/weak gold mode.