Gold Price Futures (GC) Technical Analysis – Needs to Hold $1235.80 or $1222.70 Becomes Next Downside Target

Gold futures finished higher on Friday, underpinned on two fronts by safe-haven buying related to heightened stock market volatility and weaker-than-expected U.S. inflation data. The safe-haven buying is being fueled by weakening stock prices. This could be a short-term contributor to the rally because it will likely end when the stock market turns around.

However, the reaction to the weak inflation data has the potential to develop into something a little more long-term because it may force the U.S. Federal Reserve to slow the pace of its interest rate hikes. This would put pressure on the U.S. Dollar and this could make dollar-denominated gold a more attractive asset.

On Friday, December Comex Gold settled at $1235.80, up $3.40 or +0.28%.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The trend was reaffirmed on Friday when buyers took out the last main top at $1244.70. If buyers can extend the rally over $1244.70 then the next target is $1278.20, followed by $1325.40.

The market is in no danger of changing the main trend to down. However, due to the prolonged move up in terms of price and time, it is in the window of time for a potentially bearish closing price reversal top. This chart pattern won’t change the trend to down, but it could trigger the start of a 2 to 3 session retracement.

A series of retracement levels is controlling the price action. On the downside, the support is a Fibonacci level at $1235.80 and a 50% level at $1222.70.

If a short-term range develops between $1184.30 and $1246.00 then its retracement zone at $1215.20 to $1207.90 will become the next downside target. Since the main trend is up, buyers are likely to show up on a test of this zone since it represents value.

The first main range is $1325.40 to $1167.10. Its retracement zone at $1246.30 to $1264.90 is the next upside target. On Friday, the rally stopped at $1246.00, just below this zone.

The second main range is $1388.90 to $1165.90. Its retracement zone and potential upside target is $1277.50 to $1303.80.

As you can see on the chart, although the frequency of the retracement zone targets increases, the distance between the levels also widens, giving gold to run if the buying is strong enough.

Daily Swing Chart Technical Forecast

Based on Friday’s price action, the direction of the December Comex Gold futures contract early Monday is likely to be determined by trader reaction to the Fibonacci level at $1235.80

Bullish Scenario

A sustained move over $1235.80 will indicate the presence of buyers. If this generates enough upside momentum then look for a potential surge into the 50% level at $1246.30. This is a potential trigger point for an acceleration into the Fib level at $1264.90.

Bearish Scenario

A sustained move under $1235.80 will signal the presence of sellers. This is a potential trigger point for an acceleration into $1222.70. Since the main trend is up, look for buyers on the first test of this level.

If $1222.70 fails as support then look for the selling to extend into the short-term retracement zone at $1215.20 to $1207.90. Buyers are likely to show up on a test of this zone since it is a value area.