Gold Price Futures (GC) Technical Analysis – In Position to Test Weekly Retracement Zone at $1206.60 to $1197.20

Gold futures plunged last week, pressured by a strengthening U.S. Dollar and rising interest rates. The catalyst behind the move was the hawkish U.S. Federal Reserve. The Fed left its benchmark interest rate unchanged, while remaining on path for a fourth rate hike in December. According to the CME Group’s FedWatch tool, traders have placed the chances of a December rate hike at 75.8 percent, compared to 71.1 percent a day earlier.

Last week, December Comex Gold settled at $1208.60, down $24.70 or -2.00%.

A rally by the dollar to its highest level in 16-months against a basket of currencies helped pressure dollar-denominated gold into its lowest level since October 11. Higher interest rates make the U.S. Dollar a more attractive investment, but they also lower demand for gold because the metal doesn’t pay interest or a dividend, making it a less-attractive asset.

Weekly Technical Analysis

The main trend is down according to the weekly swing chart. Despite the 10-week, $78.90 rally, the market never crossed a main trend top so the trend never changed to up.

The two-week sell-off helped make $1246.00 a new main top. A trade through this top will change the main trend to down. A move through $1167.10 will signal a resumption of the downtrend.

The short-term range is $1167.10 to $1246.00. Its retracement zone at $1206.60 to $1197.20 is the primary downside target. Traders should watch the price action and order flow closely on a test of this zone.

Aggressive counter-trend buyers may show up on a test of this zone in an effort to form a secondary higher bottom. If they succeed then look for another run at $1246.00. If they fail then sellers are likely to extend the selling into $1167.10.

The main range is $1388.10 to $1167.10. If there is a breakout over $1246.00 then its retracement zone at $1277.60 to $1303.70 will become the primary upside target.

Weekly Technical Forecast

Based on last week’s close at $1208.60, the direction of the December Comex Gold market this week is likely to be determined by trader reaction to the 50% level at $1206.60.

A sustained move over $1206.60 will indicate the presence of buyers. If this generates enough upside momentum then look for a test of the downtrending Gann angle at $1222.00. Since the main trend is down, sellers could come in on the first test of this angle. If buyers can overtake this angle then the next upside targets become downtrending Gann angles at $1234.00 and $1240.00. The latter is the last potential support angle before the $1246.00 main top.

A sustained move under $1206.60 will signal the presence of sellers. The next two targets are the short-term Fib level at $1197.20 and an uptrending Gann angle at $1193.10. The market will begin to acceleration to the downside if $1193.10 fails as support.