Gold Price Futures (GC) Technical Analysis – Buyers Facing Challenge at $1798.50 – $1822.60 Retracement Zone

Gold futures are testing their highest level since July 5 on the back of a slight dip in Treasury yields and a lower U.S. Dollar. The price action suggests investors are betting on a weak U.S. ISM Manufacturing PMI report, due to be released later today, after China and Japan reported disappointing factory orders.

At 11:57 GMT, December Comex gold futures are trading $1789.80, up $8.00 or +0.45%. On Friday, the SPDR Gold Shares ETF (GLD) settled at $164.13, up $0.49 or +0.30%.

Lower Yields, Weak Dollar Underpinning Gold

U.S. Treasury yields are trading nearly flat to begin the new month as investors continue to assess the prospects for an economic recession. The 2-year yield also moved just above 2.9%, meaning the closely watched 2-year/10-year yield curve remains inverted, a situation often interpreted as a sign of impending recession.

Meanwhile, the U.S. Dollar sank to its lowest level against a basket of major currencies since July 5 as investors ramped up bets that aggressive Federal Reserve monetary policy would tip the economy into a recession.

China, Japan Economic Raising Global Recession Fears

Data from China soured the demand picture over the weekend after the world’s largest crude oil importer reported weak factory data. Traders blamed fresh COVID-19 lockdowns for bringing an end to last June’s brief recovery.

In Japan, manufacturing activity expanded at its weakest rate in 10 months in July, data showed on Monday.

Looking Ahead…

Today’s U.S. Manufacturing PMI report, due to be released at 14:00 GMT, is expected to show a dip from 53.0 to 52.3.

A report that shows activity slowed more than expected in July will serve as another sign that the economy was cooling amid aggressive monetary policy tightening by the Federal Reserve. This would put pressure on Treasury yields and the U.S. Dollar, while boosting demand for dollar-denominated gold.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $1727.00 will change the main trend to down.

The short-term range is $1900.80 to $1696.10. Its retracement zone at $1798.50 to $1822.60 is the next upside target. Sellers could come in on the first test of this area. However, taking out the upper level could trigger an acceleration to the upside.

On the downside, the minor support is $1743.90, followed by the long-term 50% level at $1709.10.

Daily Swing Chart Technical Forecast

Trader reaction to $1781.80 is likely to determine the direction of the December Comex gold futures contract on Monday.

Bullish Scenario

A sustained move over $1781.80 will signal the presence of buyers. If this move creates enough upside momentum then look for a surge into the short-term 50% level at $1798.50. Sellers could come in on the first test of this level.

Overcoming $1798.50 will indicate the buying is getting stronger with the Fibonacci level at $1822.60 the next target. Look for sellers on the first test of this level, but be prepared for a breakout to the upside if this level is taken out with strong buying volume.

Bearish Scenario

A sustained move under $1781.70 will indicate the presence of sellers. If this generates enough downside momentum then look for a pullback into the pivot at $1743.90. Since the main trend is up, buyers could come in on the first test of this level.