Gold Price Futures (GC) Technical Analysis – Could Break Another $70 if Fed Hikes Rates More Than Expected

Gold futures are edging lower at the mid-session on Monday, while posting an inside move just above a 29-month low reached on Friday. The price action suggests investor indecision and impending volatility.

Helping to put a cap on the market are higher U.S. Treasury yields and a steady U.S. Dollar. Both moves are being driven by expectations the U.S. Federal Reserve will deliver a steep interest rate hike when it meets on Tuesday and Wednesday.

At 17:00 GMT, December Comex gold futures are trading $1679.90, down $3.60 or -0.21%. The SPDR Gold Shares ETF (GLD) is at $155.62, down $0.22 or -0.14%.

Higher Treasury Yields Weighing on Demand for Non-Yielding Bullion

Treasury yields climbed on Monday as traders anticipated the Federal Reserve’s next moves in the face of persistently high inflation.

The benchmark 10-year Treasury yield gained 6 basis points to 3.518%, hitting its highest level since April 2011, and was last up 2 basis points to 3.467%.

The yield on the 2-year Treasury bond rose 8 basis points to trade at 3.936%, trading around levels not seen since 2007.

Traders Building in 75 Basis Point Fed Rate Hike

The Fed’s two-day meeting will begin Tuesday, with most market participants expecting another 75 basis point hike by the central bank. Some analysts have, however, argued the Fed could increase interest rates by a full point, or 100 basis points.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through $1661.90 will signal a resumption of the downtrend. A move through $1746.40 will change the main trend to up.

A trade through $1689.90 will confirm Friday’s closing price reversal bottom. This won’t change the trend, but it will shift momentum to the upside.

The nearest resistance is a long-term 50% level at $1709.10. The closest support is a long-term Fibonacci level at $1609.30.

Daily Swing Chart Technical Forecast

Trader reaction to $1675.90 is likely to determine the direction of the December Comex gold futures contract into the close on Monday.

Bullish Scenario

A sustained move over $1675.90 will indicate the presence of buyers. Taking out $1689.90 will shift momentum to the upside with the former bottom at $1694.50 the next target, followed by $1709.10.

Bearish Scenario

A sustained move under $1675.90 will signal the presence of sellers. If this creates enough downside momentum then look for the selling to extend into $1661.90. This is a potential trigger point for an acceleration to the downside with $1618.00 the next major target.