Gold Price Futures (GC) Technical Analysis – Struggle to Sustain Rally Sets Up Potential Reversal Top

Gold futures are edging lower on Monday after an early attempt to breakout above last week’s high at $1871.40 failed to attract enough buyers to continue the move. After jumping last Wednesday to its highest level since June 15 at $1870.60, the market has struggled to continue the move, stalling at $1872.60 earlier today for a gain from high-to-high of only $2.00.

At 10:48 GMT, December Comex gold futures are trading $1864.70, down $3.80 or -0.20%.

The inability to follow-through to the upside with conviction suggests traders are concerned about valuation and unwilling to buy strength at current price levels. Fundamentally, traders may be worried about the Fed taking a more hawkish stance toward cooling inflation. Or the Federal government intervening in the crude oil and gasoline markets in an attempt to drive prices lower and consequently inflation.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $1872.60 will signal a resumption of the uptrend. A move through $1758.50 will change the main trend to down.

The nearest support is the former top at $1839.00, followed by a Fibonacci level at $1828.80.

The short-term range is $1758.50 to $1872.60. Its 50% level at $1815.60 is another potential downside target.

The major support is $1800.00 – $1795.00.

Daily Swing Chart Technical Forecast

The direction of the December Comex gold market on Monday is likely to be determined by trader reaction to $1868.50.

Bullish Scenario

A sustained move over $1868.50 will indicate the presence of buyers. Taking out the intraday high at $1872.60 will indicate the buying may be getting stronger. This could trigger a breakout to the upside, but it all depends on the buying volume.

The daily chart indicates the best upside targets are $1919.10 to $1922.00 so there is a possibility of an acceleration to the upside.

Bearish Scenario

A sustained move under $1868.50 will signal the presence of sellers. If this move generates enough downside momentum then look for the selling to possibly extend into $1839.00 to $1828.80. Since the main trend is up, buyers are likely to come in on a test of this area.

If $1828.80 fails then look for further weakness into $1815.60. Once again, look for buyers on a test of this level.

Side Notes

Due to the prolonged move up in terms of price and time, gold has entered the window of time for a potentially bearish closing price reversal top.

A close under $1868.50 will form a daily closing price reversal top. If confirmed, this could trigger the start of a 2 to 3 day sell-off with $1815.60 the most likely downside target during this time frame.