Gold Price Futures (GC) Technical Analysis – Weekly Closing Price Reversal Bottom Targets $1307.00 to $1323.00

After hitting its lowest level in nearly a year, gold futures rebounded late last week to post a potentially bullish closing price reversal bottom. While the chart pattern doesn’t mean the trend is changing to up, it does indicate that the buying may be greater than the selling at current price levels especially after the prolonged sell-off in terms of price and time.

August Comex Gold settled at $1255.80, up $1.30 or 0.10%.

The catalyst behind the short-covering rally and reversal chart pattern was lower U.S. Treasury yields. Falling yields helped make the U.S. Dollar a less-desirable asset, increasing demand for dollar-denominated gold.

Yields fell partly in response to the mixed U.S. Non-Farm Payrolls report which showed a better-than-expected headline number, but an unexpected rise in the unemployment rate and weaker-than-expected average hourly earnings.

As a result of the jobs report, expectations of a fourth U.S. Federal Reserve rate hike later this year declined. According to the Fed Funds Indicator, investors priced in a 77 percent chance of a September rate hike, down from 80 percent before the jobs data.

So while a September rate hike is still a likely event, traders feel that without an acceleration of wage growth, a fourth hike at the end of the year is a more difficult call and the futures market shows that traders are putting the odds of a December rate hike at about 50 percent.

Weekly Technical Analysis

The main trend is down according to the weekly swing chart. However, the closing price reversal bottom suggests momentum may be shifting to the upside.

A trade through $1262.40 will confirm the closing price reversal bottom. This could trigger the start of a 2 to 3 week counter-trend rally sometimes equal to 50% to 61.8% of the last down swing.

A trade through $1238.80 will negate the reversal bottom chart pattern and signal the resumption of the downtrend with initial targets a pair of main bottoms at $1230.70 and $1228.20.

The long-term retracement zone is $1268.80 to $1242.80. The market is currently trading inside this zone. This area is controlling the longer-term direction of the market.

The main range is $1375.10 to $1238.80. If confirming the closing price reversal bottom generates enough upside momentum, we could see an eventual rally into its retracement zone at $1307.00 to $1323.00.

Weekly Technical Forecast

Based on last week’s price action and the close at $1255.80, the direction of the August Comex Gold market this week is likely to be determined by trader reaction to $1262.40.

Taking out $1262.40 will confirm the closing price reversal bottom. This could trigger a quick move into the major 50% level at $1268.80, followed by the steep downtrending Gann angle at $1271.10.

Since the main trend is down, sellers may show up on the first test of $1271.10. However, overtaking this Gann angle could drive the market into at least $1307.00 over the near-term.

A sustained move under $1262.40 will signal the presence of sellers. This could lead to a retest of the support cluster at $1242.80, $1239.40 and $1238.80.

If the support cluster fails then look for selling to extend into $1230.70 then $1228.20. The latter is the trigger point for an acceleration to the downside.