Gold Price Futures (GC) Technical Analysis – Weakens Under $1781.00, Strengthens Over $1794.30

Gold futures are trading lower on Friday, shortly before the release of key U.S. inflation data that could prompt the Federal Reserve to taper its bond purchases at a faster pace. The early weakness puts the market in a position to post its fourth straight weekly decline.

Prices have fallen about 0.7% so far this week, as investors exercised caution before the U.S. Consumer Price Index (CPI) report, due at 13:30 GMT, and the Fed policy meeting next week.

At 11:14 GMT, February Comex gold is trading $1771.40, down $5.30 or -0.30%. On Thursday, the SPDR Gold Shares (GLD) ETF settled at $165.87, up $1.03 or -0.62%.

Gold traders expect a high inflation reading, which could lead the Federal Reserve to hasten the taper of its $120-billion monthly bond-buying program. Economists surveyed by Dow Jones expect a 0.7% gain for the month of November, which would translate to a year-over-year growth rate of 6.7%. If that is the case, it will mark the biggest move since June 1982.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum has been trending lower since the formation of the closing price reversal top on November 16.

A trade through $1762.20 will change the main trend to down. A move through $1761.00 will reaffirm the downtrend.

A move through $1794.30 will reaffirm the uptrend and could trigger a breakout to the upside.

The minor trend is also down. The minor trend changed to down earlier today on a trade through $1772.40.

The main range is $1723.70 to $1881.90. The market is currently testing its retracement zone at $1781.00 to $1757.10. This zone is controlling the near-term direction of the gold market.

The minor range is $1819.30 to $1762.20. Its 50% level at $1790.80 is resistance. This level stopped a rally at $1794.30 on December 8.

The short-term range is $1881.90 to $1762.20. Its 50% level at $1822.10 is another resistance level.

Daily Swing Chart Technical Forecast

The direction of the February Comex gold market on Friday is likely to be determined by trader reaction to $1781.00.

Bearish Scenario

A sustained move under $1781.00 will indicate the presence of sellers. Taking out the intraday low will indicate the selling pressure is getting stronger. This could trigger a break into the pair of main bottoms at $1762.20 and $1761.10.

The main trend changes to down on a trade through $1762.20. The downtrend is reaffirmed on a move through $1761.00. This could lead to a test of the Fibonacci level at $1757.10. This level is a potential trigger point for an acceleration to the downside with $1723.70 the next major downside target.

Bullish Scenario

A sustained move over $1781.00 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into $1790.80, followed by $1794.30.

Taking out $1794.30 could trigger an acceleration to the upside with $1819.30 to $1822.10 the next major upside target area.