Gold Price Futures (GC) Technical Analysis – Strengthens Over $1894.60, Weakens Under $1870.30

Gold futures are inching higher early Monday after recovering from early session weakness. Traders look a bit tentative as they try to digest the impact of the new COVID-19 package passed by Congress earlier in the day after it’s been anticipated for weeks.

In the United States, Republican U.S. Senate Majority Leader Mitch McConnell said an agreement had been reached by congressional leaders on a roughly $900 billion COVID-19 relief bill.

At 01:40 GMT, February Comex gold is trading $1904.10, up $15.20 or +0.80%.

Some of the concerns in the gold market may be being fueled by worries over a crowded short-USD trade. Some long gold traders anticipate a short-covering really in the dollar if we see the COVID-19 deal accompanied by a Brexit deal. If this were to occur, dollar-denominated gold could break hard because of heavy foreign selling pressure.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was reaffirmed when buyers took out last week’s high at 1902.00. Buyers then took out the minor top at $1904.30 before stalling at $195.90. A trade through $1820 will change the main trend to down.

The short-term range is $1973.30 to $1767.20. The market is currently trading on the strong side of its retracement zone at $1894.60 to $1870.30, putting gold in a bullish position.

Daily Swing Chart Technical Forecast

The direction of the February Comex gold market on Monday is likely to be determined by trader reaction to the Fibonacci level at $1894.60.

Bullish Scenario

A sustained move over $1894.60 will indicate the presence of buyers. If this generates enough upside momentum then look for the rally to possibly extend beyond the minor tops at 1902.00 and $1904.30.

The daily chart shows there is plenty of room to the upside over $1904.30 with the November 9 main top at $1973.30 the next major upside target. Depending on the buying volume, we could see an acceleration to the upside, or a slow grind over the near-term until we reach the main top target.

Bearish Scenario

A sustained move under $1894.60 will signal the presence of sellers. This could trigger a break into the 50% level at $1870.30. This is a potential trigger point for an acceleration to the downside with the main bottom at $1820.00 the next major target. Taking out this level changes the main trend to down.