Gold Price Futures (GC) Technical Analysis – Poised for Steep Loss as 2-Year Treasury Yields Rise

Gold futures are edging lower on Thursday after hitting their lowest level in more than 18 months earlier in the session. The market is being pressured by increased prospects of more aggressive rate hikes by the Federal Reserve and a stronger U.S. Dollar. Currently, the FedWatch Tool is calling for a rate hike of 75 to 100 basis points at next week’s central bank policy meeting.

At 11:56 GMT, December Comex gold futures are trading $1694.80, down $14.30 or -0.84%. On Wednesday, the SPDR Gold Shares ETF (GLD) settled at $157.92, down $0.62 or -0.39%.

Rising Yields Continue to Drive Gold Prices Lower

Ahead of today’s New York trading session, short-term U.S. Treasury yields continued to rise as investors weighted the prospect of larger rate hikes from the Federal Reserve at its September 20-21 meeting.

The yield on the 2-year Treasury, which is among those most affected by Fed decisions, rose 4 basis points to 3.823%, its highest level since 2007. It’s risen roughly 25 points since Tuesday.

Retail Sales on Tap

Looking ahead, investors will get the opportunity to react to a raft of data releases including figures on retail sales, import and export prices, jobless claims, manufacturing and industrial production.

Traders aren’t looking for much of a response in the gold market from these reports unless there is a major miss. Investors know the Fed is going to raise rates aggressively next week, and they know that the economy could weaken further from the move. The Fed even warned several weeks ago that consumer should expect some “pain”.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The downtrend was reaffirmed earlier today when sellers took out the March 20, 2021 main bottom at $1694.50. A trade through $1746.40 will change the main trend to up.

On the upside, the nearest resistance is a long-term 50% level at $1709.10. On the downside, the major support is a long-term Fibonacci level at $1609.30.

Daily Swing Chart Technical Forecast

Trader reaction to $1709.10 is likely to determine the direction of the December Comex gold futures contract on Thursday.

Bearish Scenario

A sustained move under $1709.10 will indicate the presence of sellers. The next major target is $1694.50. This is a potential trigger point for an acceleration to the downside with the next major target the April 1, 2020 main bottom at $1618.00. This is known as the pandemic low.

Bullish Scenario

A sustained move over $1709.10 will signal the presence of buyers. If this generates enough upside momentum then look for a surge into $1709.10.

Sellers are likely to come in on the first test of $1709.10, but overtaking it could lead to more short-covering.