Gold Price Futures (GC) Technical Analysis – Strengthens Over $1575.10, Weakens Under $1547.60

Gold futures plunged over 4.5% on Friday as coronavirus drove panic-stricken investors to liquidate assets across the board. The sell-off serves as proof that gold is an investment and not a safe-haven asset as the brokers like to tell the uniformed lambs who like to buy it during times of economic turmoil.

On Friday, April Comex gold settled at $1566.70, down $75.80 or -4.61%.

The move was likely fueled by heavy professional and hedge funds selling as the two major players sought to raise cash to meet margin calls and to offset tremendous losses in the equity markets. The gold market also posted its biggest weekly decline since November.

Despite the steep break, the longer-term fundamentals remain bullish especially if the Fed cuts its benchmark interest rate sooner than expected at its March meeting. On Friday, U.S. Federal Reserve Chairman Jerome Powell confirmed this notion when he suggested the Fed would take appropriate action to offset the excessive volatility in the stock market.

Daily Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down on Friday when sellers took out the last swing bottom at $1564.40.

The main trend will change to up on a trade through $1691.70. This is highly unlikely but due to the steep break on Friday, the gold market may be ripe for a closing price reversal bottom.

The main range is $1458.50 to $1691.70. Its retracement zone at $1575.10 to $1547.60 is the first downside target. This zone was tested on Friday. Trader reaction to this zone will likely determine the near-term direction of the gold market.

Short-term Outlook

The next move in gold is likely to be determined by how investors react to the retracement zone at $1575.10 to $1547.60.

If the stock market sell-off continues then look for further weakness in gold. Taking out the Fibonacci level at $1547.60 could trigger a further decline into the uptrending Gann angle at $1531.50.

The angle at $1531.50 is a potential trigger point for an acceleration to the downside with potential target angles coming in at $1495.00 and $1476.80. The latter is the last potential support angle before the $1458.50 main bottom.

Overcoming the 50% level at $1575.10 will signal the return of buyers. If this move is able to create enough upside momentum then look for the rally to possibly extend into a pair of Gann angles at 1604.50 and $1627.70.

Side Notes

Gold is likely to continue to weaken if global equity markets continue to break sharply and investors are forced to meet margin calls and cover losses. If conditions calm in the stock market then look for gold to rally because traders will see value at current price levels.