Gold Price Futures (GC) Technical Analysis – Momentum Shift Could Trigger Break into 50% Level at $1733.90

Gold futures are edging lower shortly after the regular session opening on Friday in light trading. The move reverses earlier gains. Although the market is on pace to close higher for a third week, the shift in momentum is threatening those gains. The market is moving nearly lockstep with equity prices this week, which means weaker stock prices could drive the market even lower throughout the session.

At 13:45 GMT, August Comex gold is trading $1754.40, down $13.20 or -0.75%.

Risk sentiment isn’t actually controlling gold per se, but it is moving the U.S. Dollar because of safe-haven demand. Investors have been moving money into the U.S. Dollar since Wednesday for protection. This has been weighing on demand for dollar-denominated gold.

Traders should continue to monitor the relationship between stocks, the Dollar and gold throughout the session.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has been trending lower since the formation of the closing price reversal top on June 24. This potentially bearish chart pattern was confirmed on Thursday.

A trade through $1796.10 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a trade through $1671.70.

The minor trend is also up. A trade through $1706.20 will change the minor trend to down. This will confirm the shift in momentum.

The minor range is $1671.70 to $1796.10. Its 50% level at $1733.90 is the next downside target. Since the main trend is up, buyers are likely to come in on a test of this level.

Daily Swing Chart Technical Forecast

The closing price reversal top typically leads to a 2 to 3 day sell-off or at least a 50% retracement of the last rally. If the downside momentum continues today or Monday, we could see a plunge into at least $1733.90.

Watch for a technical bounce on the first test of this level. If it fails then the selling could extend into the minor bottom at $1706.20.

Overtaking $1796.10 could trigger another surge to the upside.

Falling equity prices are likely to weigh on gold prices because liquidity concerns should continue to send investors into the U.S. Dollar. A turnaround in the stock market, on the other hand, could fuel an intraday short-covering rally.

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