Gold Price Futures (GC) Technical Analysis – Friday’s Reversal Bottom May Have Shifted Short-Term Momentum

Gold futures closed higher on Friday after rebounding from an earlier loss. The move was fueled by a similar reversal in U.S. Treasury yields and a flat U.S. Dollar. The price action suggested traders were already beginning to square positions ahead of Wednesday’s U.S. Federal Reserve interest rate decision.

Some headlines said gold rose on safe-haven buying tied to recession forecasts, but there was no clear evidence of this. Keep in mind that the true safe-haven markets are U.S. Treasurys, the U.S. Dollar and the Japanese Yen.

On Friday, December Comex gold futures settled at $1683.50, up $6.20 or +0.37%. This was up from an intraday low of $1661.90, which was the weakest price since April 2020. The SPDR Gold Shares ETF (GLD) finished at $155.85, up $0.87 or +0.56%.

Gold prices fell sharply early last week after traders, reacting to a hotter-than-expected U.S. consumer inflation report, priced in the possibility of a 100 basis point rate hike by the Fed on September 21. However, after the initial reaction, the markets calmed down and now it looks like the rate hike will be 75 basis points. This could lead to further short-covering early this week.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, a trade through $1689.90 will confirm Friday’s closing price reversal bottom and shift momentum to the upside.

A trade through $1746.40 will change the main trend to up. A move through $1661.90 will negate the closing price reversal bottom and signal a resumption of the downtrend.

On the upside, the nearest resistance is a long-term 50% level at $1709.10. On the downside, the nearest support is a long-term Fibonacci level at $1609.30.

Short-Term Outlook

Trader reaction to $1675.90 is likely to determine the direction of the December Comex gold futures contract early Monday.

Bullish Scenario

A sustained move over $1675.90 will indicate the presence of buyers. Taking out $1661.90 will indicate the counter-trend buying is getting stronger. This could trigger a rally into the former bottom at $1694.50, followed by the long-term 50% level at $1709.10.

Bearish Scenario

A sustained move under $1675.90 will signal the presence of sellers. If this creates enough downside momentum then look for a test of last week’s low at $1661.90.

Taking out $1661.90 will signal a resumption of the downtrend and could trigger the restart of the acceleration into the April 1, 2020 main bottom at $1618.00.