Gold Price Futures (GC) Technical Analysis – In Position to Challenge March 2021 Bottom at $1694.50

Gold futures finished lower on Tuesday after giving back early gains. The selling pressure was fueled by concerns about the aggressive pace of interest rate hikes to curb inflation, a surge in Treasury yields and a stronger U.S. Dollar.

On Tuesday, December Comex gold futures settled at $1712.90, down $9.70 or -0.57%. The SPDR Gold Shares ETF (GLD) closed at $158.36, down $0.90 or -0.56%.

Traders Bracing for Major Central Bank Rate Hikes

Early in the day the Reserve Bank of Australia (RBA) raised its benchmark rate by 50-basis-points. On Wednesday, the Bank of Canada (BOC) is expected to hike rates by 75-basis-points. On Thursday, the European Central Bank (ECB) is forecast to deliver a 75-basis-point interest rate hike to tame surging prices. Traders are also leaning toward a 75-basis-point rate hike by the Federal Reserve following its September 20-21 policy meeting.

Firm Yields, Stronger Dollar Weigh on Gold Demand

Benchmark U.S. Treasury yields rose to their highest levels since June on expectations that the Fed will keep hiking interest rates. Higher yields raise the opportunity cost of holding non-yielding gold.

The U.S. Dollar jumped to a two-decade high after data showed the U.S. services industry picked up in August, making gold more expensive for overseas buyers.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through $1699.10 will reaffirm the downtrend. A move through $1778.80 will change the main trend to up.

The major support is the long-term 50% level at $1709.10.

On the upside, the nearest resistance is a pivot at $1739.00, followed by a short-term 50% level at $1760.40.

Short-Term Outlook

Trader reaction to $1709.10 is likely to determine the direction of the December Comex gold futures contract early Wednesday.

Bullish Scenario

A sustained move over $1709.10 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into the resistance cluster at $1727.40 to $1739.00.

Bearish Scenario

A sustained move under $1709.10 will signal the presence of sellers. Taking out $1699.10 will indicate the selling pressure is getting stronger with the next target a support cluster at $1696.10 to $1699.10. The latter is a potential trigger point for an acceleration to the downside.