Comex Gold Futures (GC) Technical Analysis – December 20, 2016 Forecast

February Comex Gold futures are trading lower on Tuesday, mostly in reaction to the stronger U.S. Dollar. The dollar is picking up strength due to a weaker Japanese Yen.

The Yen weakened after the Bank of Japan held policy steady. As expected, the BOJ maintained its pledge to guide short-term rates at minus 0.1 percent and the 10-year government bond yield around zero percent. It also offered a more upbeat assessment of the economy, stating that it continues to recover moderately as a trend. The central bank also reiterated its belief that a generally weak Yen and rebound in overseas demand will lift prospects for a solid recovery.

Greater demand for higher risk assets like U.S. equities also weighed on gold prices.

Technical Analysis

The main trend is down according to the daily swing chart. The main trend will turn up on a trade through $1190.20. The market is far from turning the main trend to up, but there is room for a meaningful retracement or correction.

The short-term range is $1124.30 to $1146.00. Its 50% level or pivot comes in at $1135.20.

The main range is $1190.20 to $1124.30. Its 50% target comes in at $1157.30.

The major upside target is a Fibonacci level at $1182.00.

Forecast

Based on the current price at $1136.80, the direction of the gold market today is likely to be determined by trader reaction to the short-term pivot at $1135.20.

A sustained move under $1135.20 will indicate the presence of sellers. This could create enough downside momentum to challenge last week’s low at $1124.30, followed closely by a longer-term uptrending angle at $1118.70. This is the trigger point for an even steeper break with $1086.90 the next major downside target.

Holding above $1135.20 will signal the presence of buyers. This could generate enough upside momentum to challenge a pair of downtrending angles at $1144.10 and $1146.20. These angles have been guiding the market lower since November 16 and December 5 respectively.

Watch for a technical bounce on the first test of $1144.10 to $1146.20, but be prepared for a possible acceleration to the upside if $1146.20 is taken out with conviction. This could trigger a quick rally into $1157.30.

Watch the price action and read the order flow at $1135.20 today. Trader reaction to this level will tell us if the sellers are retaking control or if the counter-trend buying is getting stronger. Volume is expected to be well-below average so be careful buying strength and selling weakness and watch out for volatility spikes.