Gold Price Futures (GC) Technical Analysis – Hedge Funds Long, Specs Chasing – Perfect Trade

Gold futures are spiking higher in the early trade on Friday. Today’s upside momentum has put the market in a strong position to challenge last year’s high at $1571.70 over the near-term. The price behavior in gold and other financial markets indicates that today is likely to be a “risk-off” day.

At 07:26 GMT, February Comex gold is trading $1543.40, up $15.30 or +1.00%.

The catalyst behind today’s rally is the news that U.S. air strikes in Iraq killed a top Iranian commander, heightening geopolitical tensions. Trader bought gold because of the action, but speculators are buying gold in anticipation of retaliation from the Iranian government and military.

 

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The main trend was reaffirmed on Friday when buyers took out the October 3 main top at $1532.40. The next upside target is the September 24 main top at $1549.90. This is the last potential resistance before the September 4 main top at $1571.70.

On the downside, the main trend will change to down on a trade through the December 9 main bottom at $1463.00. This level is followed closely by additional main bottoms at $1456.60 and $1453.10.

The main range is $1571.70 to $1453.10. Its retracement zone at $1526.40 to $1512.40 is support.

Daily Swing Chart Technical Forecast

Given the strong rally, the only thing that long investors have to worry about is a sudden shift in momentum to the downside. Signs of topping action will include a failure to take out $1549.90 with conviction, and/or a break below the previous top at $1532.40.

Turning lower for the session on a move under $1528.10 will send a strong signal that the selling is greater than the buying at current price levels. A close under this level could trigger the start of a 2 to 3 correction.

For the longs, we’d like to see a solid move through $1549.90 then the establishment of support under this level. This will indicate that speculators are chasing the market higher. If this move can trigger enough upside momentum then look for the rally to extend into $1571.70.

Remember, the hedge funds have been long for about two months. These professionals built the support base. The public is trading the breakout so their likely to overload on the long side at some point. The hedge funds are probably starting to sell to the public speculators.