Gold Price Futures (GC) Technical Analysis – Strong Over $1949.40; Trigger Point for Breakdown is $1928.90

A recovery in the U.S. Dollar against a basket of major currencies is helping to put pressure on gold prices shortly before the regular session opening on Friday. Treasury yields are inching lower, but we mentioned yesterday that since Wednesday’s Fed minutes release, the traditional yield, dollar, gold relationship is not working. This is probably a short-term thing, but traders should pay attention to it.

At 10:06 GMT, December Comex gold is trading $1942.40, down $4.10 or -0.21%.

The type of price action we’re seeing usually occurs when investors treat both Treasurys and the U.S. Dollar as safe-haven investments. The Fed spooked traders on Wednesday with a dire forecast for the economy. The problem with the economy may have been confirmed with the release of a weak U.S. Weekly Initial Claims report on Thursday.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum and possibly the trend may be getting ready to shift to the downside with the formation of a potentially bearish secondary lower top.

A trade through $2024.60 will signal a resumption of the uptrend. The main trend will change to down on a move through $1874.20.

The minor range is $1874.20 to $2024.60. Its retracement zone at $1949.40 to $1931.70 has been providing support the last three sessions.

The short-term range is $2089.20 to $1874.20. Its retracement zone at $1981.70 to $2007.10 is potential resistance. This zone essentially stopped the buying on August 18.

The main range is $1690.10 to $2089.20. Its retracement zone at $1889.70 to $1842.60 is the major support. It stopped the selling on August 12.

Daily Swing Chart Technical Forecast

Based on the early price action and the movement the past three sessions, the direction of the December Comex gold futures contract on Friday is likely to be determined by trader reaction to the 50% level at $1949.40 and the 61.8% level at $1931.70.

Bullish Scenario

A sustained move over $1949.40 will indicate the presence of buyers. If this move creates enough upside momentum then look for a rally into the 50% level at $1981.70, followed by the Fib level at $2007.10 and the main top at $2024.60.

Bearish Scenario

A sustained move under $1931.70 will signal the presence of sellers. The trigger point for a potential acceleration to the downside is $1928.90. This could lead to a retest of the 50% level at $1889.70 and the main bottom at $1874.20.

For a look at all of today’s economic events, check out our economic calendar.