Gold Price Futures (GC) Technical Analysis – Strengthens Over $1246.30, Weakens Under $1222.70

Gold posted its highest close since the week-ending July 20 last week. The rally was driven by heightened volatility and another plunge in U.S. equity markets. If stocks remain under pressure, gold is likely to remain underpinned due to increasing safe haven demand for the metal. If the equity markets stabilize then gold could break due to the lifting of safe-haven hedges and profit-taking.

Last week, December Comex Gold settled at $1235.80, up $7.10 or +0.58%. Early in the session on Monday at 0721 GMT, the market is trading $1232.50, down $3.30 or -0.26%.

Weekly Swing Chart Technical Analysis

The main trend is down according to the weekly swing chart. However, momentum shifted to the upside when the market broke out to the upside of an elongated trading range. A move through $1246.00 will indicate the counter-trend buying is getting stronger. A trade through $1167.10 will signal a resumption of the downtrend.

The minor trend is also down. A trade through $1278.20 will change the minor trend to up. This will reaffirm the shift in momentum.

The price action on the weekly swing chart is being controlled by a series of 50% levels.

On the downside, 50% support comes in at $1222.70 and $1206.60.

On the upside, the first 50% resistance is $1246.30. Last week, the market stopped at $1246.00. The next target is the 50% level at $1277.60. This forms a resistance cluster with the minor top at $1278.20.

Weekly Swing Chart Technical Forecast

Based on last week’s close at $1235.80, the direction of the December Comex Gold futures contract this week is likely to be determined by trader reaction to $1222.70 and $1246.30.

Bullish Scenario

Taking out $1246.30 and sustaining the rally will signal the presence of buyers. If this creates enough upside momentum, we could see a test of $1277.60 to $1278.20 later this week. Since the main trend is down, sellers are likely to come in on a test of this resistance cluster. Taking out $1278.20 with conviction, however, could trigger an acceleration to the upside with the next target the main Fibonacci level at $1303.70.

Bearish Scenario

The inability to take out and sustain a move over $1246.30 will be the first sign of selling pressure. However, we’re likely to see an acceleration to the downside if $1222.70 fails as support.

Given the short-term range at $1167.10 to $1246.00, a trade through $1222.70 could trigger a further decline into its 50% level at $1206.60.