Gold Price Futures (GC) Technical Analysis – Trader Reaction to Short-Term Retracement Zone Sets the Tone

Gold futures dipped on Friday, retreating from a one-month high hit the previous session, as a firmer U.S. Dollar dampened the investment appeal of the dollar-denominated asset. Nonetheless, the weakness in the greenback throughout the week is what helped the precious metal notch its third consecutive weekly advance.

At 21:33 GMT, February Comex gold is trading $1886.50, down $3.90 or -0.21%.

Uncertainty over the size and the timing of fresh stimulus from the government may have capped gold’s upside potential. With coronavirus infections roaring back to new record highs across the United States, pressure mounted on lawmakers to deliver more relief aid in time for a crucial Friday deadline.

Ahead of the weekend, the primary focus remains on whether there is a stimulus deal before Monday morning.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The trend turned up on Thursday when buyers took out $1879.80. A trade through $1820.00 will change the main trend to down.

The short-term range is $1973.30 to $1767.20. Its retracement zone at $1870.30 to $1894.60 is potential resistance. It is currently being tested.

The minor range is $1820.00 to $1902.00 Its retracement zone at $1861.00 to $1851.30 is a potential downside target.

The major support is a long-term retracement zone at $1780.50 to $1705.20.

Daily Swing Chart Technical Forecast

The price swings in December have all been headline driven. The headline has been about stimulus.

The market is currently testing a key retracement zone at $1870.30 to $1894.60. Trader reaction to this zone will determine the next major move. Needless to say, a breakout in either direction will have to be fueled by a stimulus headline in order to attract the volume needed to follow-through.

Bullish developments should trigger a breakout to the upside with the trigger point the Fibonacci level at $1894.60 or yesterday’s high at $1902.00. The daily chart shows no visible resistance until $1973.30.

A move through the 50% level at $1870.30 will be a sign of weakness. However, the early selling will be labored because of minor retracement levels at $1861.00 and $1851.30.

We could see a spike to the downside if $1851.30 fails as support with $1820.00 the next major target.

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