August Comex Gold futures are trading slightly higher on Tuesday after a steep sell-off yesterday. Today is a bank holiday in the U.S. so the trading session will be shortened. Therefore, we’re going to take a look at the weekly chart. This chart should be used as a reference all week.
Technical Analysis
The main trend is up according to the weekly swing chart. However, momentum is trending lower. Monday’s steep sell-off stopped short of the last main bottom at $1217.80. Taking out this bottom will change the main trend to down. If the downside momentum continues, the selling should extend into the next main bottom at $1201.40.
A failure at $1201.40 could trigger an acceleration to the downside since the next major bottom doesn’t come in until $1133.30.
The main range is $1133.30 to $1300.30. Its retracement zone at $1216.80 to $1197.10 is the primary downside target. The upper or 50% level at $1216.80 stopped the break in early May at $1217.80. Monday’s move stopped at $1218.00 so buyers are respecting the 50% level.
Look for an acceleration to the downside if $1216.80 fails as support. This could trigger a fast break into the main bottom at $1201.40 and the Fibonacci level at $1197.10.
Forecast
Looking ahead to the rest of the week, the direction of the gold market will be determined by trader reaction to $1217.80 to $1216.80.
Holding above $1217.80 will indicate that buyers are coming in to defend the trend. This could drive the market back into a downtrending Gann angle at $1234.80. Overtaking this angle could trigger the start of a short-covering rally.
Crossing to the weak side of the 50% level at $1216.80 could trigger an acceleration to the downside. This could lead to a test of $1201.40 to $1197.10. This is followed closely by an uptrending angle at $1191.30. This angle is also the trigger point for another acceleration to the downside.
Watch the price action and read the order flow at $1217.80 to $1216.80 all week. Trader reaction to this area will tell us if buyers are coming in to defend the market, or if sellers are taking control.