Gold Price Futures (GC) Technical Analysis – Trade Through $1278.10 Confirms Friday’s Closing Price Reversal Top

Gold prices are under pressure early Tuesday in reaction to a stronger U.S. Dollar and increased demand for higher-yielding assets. The catalyst behind the price action is optimism that the two-day trade talks in Beijing between the United States and China may be bringing the two economic powerhouses closer to ending its current trade spat. Additionally, higher Treasury yields may be propping up the U.S. Dollar.

At 0616 GMT, February Comex gold is trading $1285.20, down $4.80 or -0.37%.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, Friday’s closing price reversal top is starting to shift momentum to the downside. Momentum will officially shift to the downside when the chart pattern is confirmed.

A trade through $1300.40 will negate the closing price reversal top and signal a resumption of the uptrend.

A move through $1278.10 will confirm the closing price reversal top. This could trigger the start of a 2 to 3 day counter-trend sell-off. The potential targets are the short-term 50% level at $1268.50, the intermediate 50% level at $1258.56 and the long-term 50% level at $1251.40.

On the upside, the major long-term 50% to 61.8% retracement zone at $1285.70 to $1312.30 is currently being tested. It stopped the rally last week at $1300.40.

Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the February Comex gold futures contract on Tuesday is likely to be determined by trader reaction to the major 50% level at $1285.70.

Bullish Scenario

A sustained move over $1285.70 will indicate the presence of buyers. If this move is able to generate enough upside momentum then we could see a retest of last week’s high at $1300.40. Taking out this level with rising volume could trigger an acceleration to the upside with the next target the main Fibonacci level at $1312.30.

Bearish Scenario

A sustained move under $1285.70 will signal the presence of sellers. If this move creates enough downside momentum then look for a drive into $1278.10.

Taking out $1278.10 will confirm the closing price reversal top. This could trigger a further break into the short-term 50% level at $1268.50. This is the first downside target. Since the main trend is up, buyers could come in on a test of this level.

If $1268.50 fails as support then look for another steep break into the intermediate 50% level at $1258.60. Once again, trend traders are likely to step in on a test of this level.