Gold Price Futures (GC) Technical Analysis – Winding Tighter Ahead of Major Move

Gold prices dipped on Monday as the dollar benefited from safe-haven buying driven by fears over a second wave of coronavirus infections. Gold has been drifting sideways to lower for about a month with short-term investors caught between prospects of massive monetary inflation, which should support prices, and deflationary pressure from weak economic data.

At 18:47 GMT, June Comex gold is trading $1699.80, down $14.10 or -0.82%.

Longer-term, however, the current easy money environment should actually be bullish for gold because the fiscal stimulus from the U.S. government and monetary stimulus from the U.S. Federal Reserve is likely to keep pressure on the greenback.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through $1737.00 will change the main trend to up. This is followed by main tops at $1764.20 and $1788.80.

A trade through $1676.00 will signal a resumption of the downtrend. This is followed by another main bottom at $1666.20, a potential trigger point for an acceleration to the downside.

The short-term range is $1788.80 to $1666.20. Its 50% level or pivot at $1727.50 is resistance.

The intermediate range is $1576.00 to $1788.80. Its retracement zone at $1682.40 to $1657.30 is support. This zone stopped the selling at $1666.20 and $1676.00.

The main range is $1453.00 to $1788.80. Its retracement zone at $1620.90 to $1581.30 is the next value zone.

Short-Term Outlook

Gold is trading between a pair of 50% levels at $1682.40 and $1727.50 for the 11^th straight session. This tends to indicate investor indecision and impending volatility. The indecision is being fueled by the clash between short-term traders and long-term investors. The tight trading range is driving volatility lower so with the next move, it’s likely to expand.

Bullish Scenario

Holding $1682.40 to $1657.30 will indicate the presence of buyers. Overtaking $1727.50 could create the upside momentum needed to overtake the minor top at $1735.50, and the main tops at $1737.00, $1764.20 and $1788.80.

Bearish Scenario

The inability to overcome $1727.50 will signal the presence of sellers. Taking out $1682.40 will indicate the selling is getting stronger. This could lead to a test of $1676.00 and $1666.20.

Look for an acceleration to the downside if the Fibonacci level at $1657.30 fails as support.

Side Notes

The short-term traders are trying to prop up this market. The longer-term buyers would like to see it hit a value zone so they could by more. It essentially all comes down to risk and reward, or buying strength at current price levels, or playing for a pullback into a value area.