Gold Price Futures (GC) Technical Analysis – Could Strengthen Over $1680.50, Weaken Under $1666.70

Gold futures are inching higher on Tuesday after reversing an earlier loss as Treasury yields dipped, weakening the U.S. Dollar and driving a little foreign demand into the dollar-denominated asset.

Traders shouldn’t read into today’s early reversal since it’s probably related to the start of position-squaring and profit-taking ahead of Thursday’s U.S. consumer inflation report.

At 14:16 GMT, December Comex gold futures are trading $1676.50, up $1.30 or +0.08%. On Monday, the SPDR Gold Shares ETF (GLD) settled at $155.45, down $2.43 or -1.54%.

Light volume is also playing a role in today’s early strength as many of the major players remain on the sidelines ahead of the consumer inflation news which could offer more clarity on the U.S. rate hike path.

The bottom line is that it’s very difficult to build a bullish case for higher gold prices at this time. One thing that has traders rattled is the likelihood of a fourth-straight super-sized rate hike by the Federal Reserve on November 2.

Friday’s stronger-than-expected U.S. jobs market report lifted the odds of a 75-basis-point rate hike, sending gold prices sharply lower, but a higher-than-expected inflation report is likely to cement the chances of another big rate hike. This report could deliver the blow that drives gold under the psychological $1500 level.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through $1738.70 will change the main trend to up. A move through $1622.20 will signal a resumption of the downtrend.

The main range is $1824.60 to $1622.20. Its retracement zone at $1723.40 to $1747.30 stopped the rally at $1738.70 on October 4. Additional resistance is the long-term 50% level at $1709.10.

The short-term range is $1622.20 to $1738.70. The market is currently testing is retracement zone at $1680.50 to $1666.70.

Daily Swing Chart Technical Forecast

Trader reaction to $1680.50 and $1666.70 is likely to determine the direction of the December Comex gold futures contract on Tuesday.

Bullish Scenario

Aggressive counter-trend buyers are going to try to produce a potentially bullish secondary higher bottom. A sustained move over $1680.50 will indicate the presence of buyers. If this move is able to generate enough upside momentum then look for a surge into a pair of 50% levels at $1703.10 and $1709.10.

Bearish Scenario

Trend traders are going to try to drive the market through the Fibonacci level at $1666.70. This is a potential trigger point for an acceleration to the downside with the next major target a support cluster at $1622.20 to $1609.30.