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James Hyerczyk

Rising Treasury yields and a firmer U.S. Dollar are weighing on gold prices on Tuesday as investors return to the safety of the greenback after Beijing slapped sanctions on U.S. officials in the latest flare-up in tensions between the United States and China, with investors also keeping a close watch on negotiations over a U.S. stimulus plan.

At 05:31 GMT, December Comex gold is trading $2022.40, down $17.30 or -0.85%.

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The dollar, an alternative safe-haven asset especially during flare-ups in tensions between the world’s two biggest economies, rose to a one-week high against other major currencies.

After a slight dip on Monday, Treasury yields are rising again early Tuesday, hitting their highest level since July 30. If they continue to grind higher, then look for gold prices to gradually retreat into a value area.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum is trending lower. A trade through $2089.20 will signal a resumption of the uptrend. The main trend will change to down on a break through the last main bottom at $1819.30.

The minor bottom is also up. The minor trend changes to down on a move through $1952.30. This will confirm the shift in momentum to down.

The first minor range is $1952.30 to $2089.20. Its 50% level is currently being tested.

The second minor range is $1927.50 to $2089.20. Its 50% level at $2008.40 is the next potential downside target. It’s also the trigger point for an acceleration to the downside.

The short-term range is $1819.30 to $2089.20. Its retracement zone at $1954.30 to $1922.40 is the primary downside target and nearest value zone. A test of this zone is likely to bring in new buyers.

Daily December Comex Gold

Daily Swing Chart Technical Forecast

Based on the early price action and the current price at $2022.40, the direction of the December Comex gold futures contract on Tuesday is likely to be determined by trader reaction to the pair of 50% levels at $2020.80 and $2008.40.

Bullish Scenario

A sustained move over $2020.80 will indicate the return of buyers. If this generates enough upside momentum then look for the rally to possibly test a new 50% level at $2051.40.

This level is important because aggressive counter-trend buyers may step in on a test of this level in an effort to form a potentially bearish secondary lower top. If buyers can take out this level, then this could lead to a retest of $2089.20.

Bearish Scenario

A sustained move under $2020.80 will signal the presence of sellers. This should lead to a quick test of $2008.40. This level is a potential trigger point for an acceleration to the downside with the next major target zone $1954.30 to $1922.40.

Side Notes:  Friday’s closing price reversal top was confirmed earlier today. This could trigger the start of a minimum 2 to 3 day correction.

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

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