Gold Price Futures (GC) Technical Analysis – Hits New Contract High, but Momentum May Be Slowing

Gold futures are trading higher late in the session on Friday after posting a choppy, two-sided trade earlier in the session. The market is in a position to post about a 5% gain for the week, its best performance since March 27.

The cash market pierced the $1900 per ounce barrier for the first time since 2011 as worsening relations added to fears over the hit to a global economy already reeling from the coronavirus pandemic. The news didn’t drive up gold per se, but it did push interest rates down all week, which made gold a more attractive asset.

At 19:00 GMT, December Comex gold is trading $1927.40, up $10.00 or +0.52%.

Increasing tensions between the U.S. and China overnight actually drove investors into the U.S. Dollar, pressuring gold prices. However, gold rebounded to move higher for the session after U.S. manufacturing and services PMI reports missed their forecasts. This raised concerns over the strength of the economy, driving down the U.S. Dollar, and raising demand for dollar-denominated gold.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. The uptrend was confirmed when buyers took out yesterday’s high.

A trade through $1819.30 will change the main trend to down. This is not likely over the near-term but traders should start watching for a closing price reversal top.

The new short-term range is $1819.30 to $1933.60. Its retracement zone at $1876.50 to $1863.00 is a potential support area. Since the main trend is up, buyers are likely to come in on a test of this area.

Short-Term Outlook

Although gold futures rallied to a new contract high on Friday, there was one red flag. The gain from the previous high to today’s high was only $6.50, despite the U.S. Dollar Index dropping to a 2-year low.

This suggests the buying may be weakening, but it doesn’t mean the trend is changing.

Additionally, swing chart analysis shows that recent corrections have been about $38.00.

If the market is topping out, then it could correct back to $1895.60, or 1876.50 to $1863.00. Since the main trend is up, buyers are likely to step in following a test of these levels.

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