Gold Price Futures (GC) Technical Analysis – Failure to Take Out $1870.60 Puts $1839.00 on Radar

Gold futures are trading slightly lower early Friday, hovering just below a five-month peak reached on Wednesday. Nonetheless, the market is still on track to post its biggest weekly gain since May 7, rising 2.3% as of Thursday’s close. Helping to cap the market’s gains are firm U.S. Treasury yields and a stronger U.S. Dollar.

At 02:21 GMT, December Comex gold is trading $1860.00, down $3.90 or -0.21%.

Gold has benefited from easy monetary policy introduced to spur economic growth during the pandemic, but any hike in interest rates should reduce the non-interest bearing metal’s appeal as it raises its opportunity cost.

Meanwhile, since gold is a dollar-denominated asset, a stronger U.S. Dollar should pressure bullion by increasing its cost to buyers holding other currencies.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $1870.60 will reaffirm the uptrend. A move through $1758.50 will change the main trend to down.

The market is currently trading above the July 15 main top at $1839.00, making it potential support under the “Old Tops, New Bottoms” adage.

The next potential support level is the Fibonacci level at $1828.80. This is followed by a pair of 50% support levels at $1800.00 – $1795.00.

Daily Swing Chart Technical Forecast

The direction of the December Comex gold futures contract on Friday will be determined by trader reaction to $1870.60.

Bullish Scenario

A sustained move over $1870.60 will indicate the presence of buyers. If this move creates enough upside momentum the rally could continue into the June 7 main top at $1919.00 and the June 1 main top at $1922.00.

Bearish Scenario

A sustained move under $1870.60 will signal the presence of sellers. If this generates enough downside momentum then look for the selling to possibly extend into the former top at $1839.00 and the Fibonacci level at $1828.80 over the near-term.

Side Notes

A failure to hold $1839.00 will mean that Wednesday’s breakout was fueled by short-covering and buy stops rather than new buying. It will also set up the market for a 50% correction of the $1758.50 to $1870.60 range at $1814.50.