Gold Price Futures (GC) Technical Analysis – Downside Momentum Could Drive Market into 50% Level at $1236.70

Gold futures are under pressure for a fourth session out of five as investors position themselves ahead of next week’s widely expected U.S. Federal Reserve interest rate hike. Sellers are also responding to a firm U.S. Dollar and an easing of tensions over U.S.-China trade relations. The market is also in a position to close lower for the week.

At 0826 GMT, February Comex gold futures are trading $1242.60, down $4.80 or -0.38%.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum has been trending lower since the formation of the closing price reversal top at $1256.60 on December 10 and its subsequent confirmation.

Taking out $1256.60 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a move through $1216.80.

The minor trend is also up. It will change to down on a trade through $1221.80.

The short-term range is $1216.80 to $1256.60. Its retracement zone at $1236.70 to $1232.00 is the first downside target.

The main range is $1202.40 to $1256.60. Its retracement zone target is $1229.50 to $1223.10.

Combining the two retracement zones creates a potential support cluster at $1232.00 to $1229.50.

Daily Swing Chart Technical Forecast

The primary downside target zone at this time is $1236.70 to $1232.00. Since the main trend is up, we’re expecting to see buyers re-emerge on a test of this zone. The price action is expected to continue to be largely influenced by the direction of the U.S. Dollar. Other contributing factors to a further sell-off will be rising Treasury yields and increased demand for higher risk assets.

A close below $1252.60 will produce a potentially bearish weekly closing price reversal top. This could eventually lead to a 2 to 3 week sell-off. Although we are approaching a daily support zone, a weekly reversal top will likely limit any gains on the daily chart.