Gold Price Futures (GC) Technical Analysis – Gold Headed Into Major Value Zone at $1286.80 to $1267.90

Gold prices fell sharply last week, helped by a surge in U.S. Treasury yields and a firmer U.S. Dollar. Losses could’ve been steeper if not for a mixed performance by U.S. stock indexes and a potentially bullish geopolitical event.

December Comex Gold settled at $1297.50, down $27.70 or -2.09%.

Treasury yields rose, making the U.S. Dollar a more attractive investment and reducing demand for gold after the U.S. Federal Reserve announced that it would begin reducing its balance sheet in October. The Federal Open Market Committee also left open the possibility of a rate hike in December.

Gold prices stabilized late in the week after the stock market rally started to lose traction and in reaction to a threat by North Korea to detonate a hydrogen bomb in the Pacific Ocean.

Weekly Technical Analysis

Despite the steep two-week sell-off, the main trend is up according to the weekly swing chart. A trade through $1362.40 will signal a resumption of the uptrend.

The major long-term 50% to 61.8% retracement zone is $1298.10 to $1267.90. The market is currently testing this zone.

The main range is $1211.10 to $1362.40. Its retracement zone at $1286.80 to $1268.90 is the primary downside target.

Combining the two zone makes $1268.90 to $1267.90 the best target area this week.

Weekly Forecast

Based on last week’s close at $1297.50, the direction of the market this week is likely to be determined by trader reaction to the major Fibonacci level at $1298.10.

A sustained move under $1298.10 will indicate the presence of sellers. This could drive the gold market into the main 50% level at $1286.80. This price is also the trigger point for an acceleration into the support cluster at $1268.90 to $1267.90. This area is followed by an uptrending angle at $1255.10.

A sustained move over $1298.10 will signal the presence of buyers. This could create the upside momentum needed to challenge the steep downtrending angle at $1314.40. We could see selling on the first test of this angle, but if it fails then look for an acceleration to the upside with the next target angle coming in at $1338.40.

The main trend is up so a break into a retracement zone is actually a break into a value zone. This is why $1286.80 to $1267.90 is so important to the structure of the market.

Bullish trend traders will be looking for value on a test of $1286.80 to $1267.90 so don’t be surprised by a technical bounce on a test of this zone. However, in order to generate a rally from this area, the dollar has to weaken or stocks have to break hard. A major geopolitical event could also take place during a test of this zone.