Gold Price Futures (GC) Technical Analysis – Lower Yields, Weaker Stocks Could Trigger Breakout Over $1307

Lower Treasury yields and weaker equity markets are giving December Comex Gold a boost early Monday. Yields are being pressured by Fed Chair Janet Yellen’s somewhat dovish speech on Friday at Jackson Hole. While she didn’t actually say anything dovish about monetary policy, the fact that she refrained from discussing the future of interest rates was enough to convince traders that she’s dovish. Essentially, she followed the script laid out in the recent Fed minutes.

Stocks are under pressure because of the damage caused by Hurricane Harvey. Almost all sectors of the S&P 500 Index are being affected negatively including energy, insurance and airlines.

Lower yields and weaker demand for higher risk assets should be supportive for gold futures.

Technical Analysis

The main trend is up according to the weekly swing chart. The trend turned up two weeks ago when gold crossed the previous top at $1305.50. However, momentum stopped at $1306.90, just below the $1307.00 main top.

Crossing $1307.00 with rising volume could trigger an acceleration to the upside because the next major tops don’t come in until $1392.60 to $1396.00.

The main range is $1396.00 to $1139.70. Its retracement zone is $1267.90 to $1298.10. Crossing to the strong side of this zone will put gold in a potentially bullish position.

Forecast

Based on Friday’s close at $1297.90, the direction of the gold market this week is likely to be determined by trader reaction to the Fibonacci level at $1298.10.

A sustained move over $1298.10 will indicate the presence of buyers. This could create enough upside momentum to challenge $1306.90 to $1307.00.

Taking out $1307.00 with rising volume will indicate the buying is getting stronger. This could drive the market into the downtrending angle at $1336.00.

A sustained move under $1298.10 will signal that sellers are still defending $1307.00. This could trigger a break into a downtrending angle at $1276.00, followed by a support cluster at $1267.90 to $1267.10.

Watch the price action and read the order flow at $1298.10 all week. Trader reaction to this level will tell us if the buying is getting stronger or if sellers are still in control.