Gold Price Futures (GC) Technical Analysis – Protect the Downside, the Upside Will Take Care of ItselfIf a top is forming then the market should stair-step down, first taking out $1966.50 then $1952.30.
Gold futures closed higher on Friday after hitting a new contract high early in the session. The market gave back some of its gains when Treasury yields rose slightly and the U.S. Dollar recovered from more than a two-year low.
Spot gold also reached a new all-time high with the market posting it best month since February 2016, and its fifth straight positive month.
Despite Friday’s new high, traders looked a little cautious with the new high coming in only $5.40 higher than the previous high earlier in the week before the intraday pullback. This suggests a shaky outlook over the short-run.
However, the longer-term picture remains bullish with the market tracking real interest rates that are hovering near zero percent. Extreme weakness in the U.S. Dollar also helped buoy gold prices last month with the greenback posting its biggest monthly drop in almost a decade.
On Friday, December Comex gold futures settled at $1994.00, up $27.20 or +1.38%.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. The uptrend was reaffirmed on Friday when buyers took out $2000.00. A trade through $1819.30 will change the main trend to down. This is highly unlikely, but investors should be aware of the potentially bearish closing price reversal top.
The minor range is $1927.50 to $2005.40. Its 50% level at $1966.50 is the nearest support.
The short-term range is $1819.30 to $2005.40. Its 50% level at $1912.40 is another potential support level.
This is followed by a series of retracement levels at $1896.90, $1888.70, $1871.20 and $1861.20.
There are no minor bottoms in the picture, but $1952.30 has the characteristics of a minor bottom. Another level to watch is $1927.50. This low was put in when gold dropped $72.50 on July 28.
If a top is forming then the market should stair-step down, first taking out $1966.50 then $1952.30. These are only minor levels but novice traders like to put ill-advised stops under these levels. The next such level is $1927.50.
The value levels are where the buyers are lurking. They come in at $1912.40 and the support cluster at $1896.90 and $1888.70.
In other words, $1966.50 $1952.30 and $1927.50 are weak support levels. The best is $1896.90 to $1888.70.
The decision for short-term traders is to chase the market higher or play for a pullback into value.