Gold Price Futures (GC) Technical Analysis – Downside Momentum Could Drive Market into $1184.00 Today

The free-fall in gold is continuing early Wednesday after yesterday’s temporary slowdown. The price action continues to be driven by flight-to-safety buying into the U.S. Dollar. Renewed concerns over the financial turmoil in Turkey is sending investors into the Greenback, leading to a drop in foreign demand for dollar-denominated gold. The price action also suggests that hedge fund and money managers are adding to their aggressive net short positions.

At 0511 GMT, December Comex Gold is trading $1193.90, down $6.80 or -0.56%.

Daily Technical Analysis

The main trend is down according to the daily swing chart. The market is currently in no position to change the trend to up, but due to the prolonged move down in terms of price and time, it remains inside the window of time to form a closing price reversal bottom.

When dealing with a momentum and news driven market, the best approach for trend sellers and aggressive counter-trend buyers is to pay close attention to the chart pattern and the best chart pattern is watch for is the lower-low, higher close, or closing price reversal bottom.

Trend traders should be watching for this chart pattern because it could help them tighten stops enough to lock in as much profit as possible. Waiting for the trend to change to up will leave too much profit on the table.

Aggressive counter-trend traders should be watching for this pattern because it is a safer play than trying to pick a bottom. It allows the market to find support, stop then reverse to the upside.

Daily Technical Forecast

The nearest downside target is the January 3, 2017 main bottom at $1184.00. Unless the news suddenly changes, momentum should take the gold market into this level. We could start to see short-covering and profit-taking on a test of this level. Counter-trend buyers may come in to defend this level because the next downside target is the December 22, 2016 main bottom at $1166.60. This is followed closely by the December 16, 2016 main bottom at $1162.00.

If we’re going to see a reversal bottom, it’s likely to come in following a test of $1184.00 to $1162.00.

The nearest resistance is a downtrending Gann angle at $1210.70.

Now that we’ve had our lower-low, the direction of the gold market the rest of the session is likely to be determined by trader reaction to yesterday’s close at $1200.70. A sustained move under this level will mean the selling is increasing. A sustained move over this level will put the market in a position to post a potentially bullish closing price reversal bottom.