Gold Price Futures (GC) Technical Analysis – Holding $1780.20 Bottom Could Trigger Rally into $1831.10

Gold futures fell to a three-week low on Wednesday before attempting to recover earlier losses later in the session. The market was pressured by rising U.S. Treasury yields and a stronger U.S. Dollar. Higher interest rates increase the opportunity cost of holding non-yielding bullion. A stronger dollar tends to dampen foreign demand for dollar-denominated gold.

On Wednesday, February Comex gold settled at $1786.90, up $0.60 or +0.03%.

The catalysts behind the selling pressure were robust U.S. economic data and worries over a faster tapering by the Federal Reserve that could lead to a sooner-than-expected interest rate hike.

Technically, the market hit the top end of a key 50% to 61.8% retracement zone. The move encouraged some short-sellers to cover positions and aggressive buyers to step in.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $1761.00 will change the main trend to down.

A move through $1881.90 will change the main trend to up. This is highly unlikely, but due to the prolonged break in terms of price and time, the market is now inside the window of time for a closing price reversal bottom.

The chart pattern won’t change the main trend to up, but if confirmed, it could trigger the start of a 2 to 3 day correction, or a 50% retracement of the current break.

The main range is $1680.00 to $1881.90. Its retracement zone at $1781.00 to $1757.10 is the primary downside target and value area. Buyers are likely to come in on a test of this area.

On the upside, the first two targets are a pair of 50% levels at $1802.80 and $1821.50. The new minor range is $1881.90 to $1780.20. If there is a rally then its 50% level at $1831.10 will become the primary upside target.

Daily Swing Chart Technical Forecast

The direction of February Comex gold early Friday is likely to be determined by trader reaction to $1781.00.

Bullish Scenario

A sustained move over $1781.00 will indicate the presence of buyers. This could lead to a test of $1802.80. Sellers could come in on the first test of this level, but taking it out could trigger an acceleration to the upside with $1821.50 and $1831.10 the next likely upside targets.

Bearish Scenario

A sustained move under $1781.00 will signal the presence of sellers. Taking out Friday’s low at $1780.20 will indicate the selling pressure is getting stronger. This could trigger an acceleration into the main bottom at $1761.00 and $1757.10.

Although the main trend will change to down on a trade through $1761.00, we’re still going to be looking for buyers on a pullback into $1781.00 to $1757.10.