Gold Price Futures (GC) Technical Analysis – Needs Strong Volume to Overtake $1894.60 Fibonacci Level

Gold futures are edging higher early Monday despite early signs of a “risk-on” session with U.S. equity futures moving higher. The U.S. Dollar is also trading mixed against a basket of major currencies, suggesting that the rally in gold is being fueled by aggressive speculators taking advantage of a thinly traded market.

The major players are widely expected to remain on the sidelines until after the first of January. This opens the door to heightened volatility on low volume as rogue traders try to make a market.

At 00:29 GMT, February Comex gold is trading $1892.20, up $9.00 or +0.48%.

There are a lot of factors at play early in the session that could have an impact on risk sentiment, the U.S. Dollar and gold. Traders are assessing the potential impact of a resurgent coronavirus pandemic, upcoming U.S. Senate runoffs in Georgia and President Trump’s failure to sign the recent stimulus package passed by Congress last Monday.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum has been trending sideways to lower since the formation of the closing price reversal top on December 21. A trade through $1912.00 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a move through $1820.00.

The main range is $1973.30 to $1767.20. Its retracement zone at $1870.30 to $1894.60 is currently being tested. This zone is controlling the near-term direction of the market.

The minor range is $1820.00 to $1912.00. Its retracement zone at $1866.00 to $1855.10 is support. This zone held last Monday at $1859.00.

The short-term range is $1767.20 to $1912.00. Its retracement zone at $1839.60 to $1822.50 is the last support zone before the Major Retracement zone at $1780.50 to $1705.20. This zone stopped the selling at $1767.20 on November 30.

Early Outlook

Gold is currently testing the upper level of its main retracement zone at $1870.30 to $1894.60. Trader reaction to this level at $1894.60 could set the tone of the market today.

Bullish Scenario

A sustained move over $1894.60 will indicate the presence of buyers. This could create the upside momentum to challenge the six-week high at $1912.00, which is also a potential trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under $1894.60 will signal the presence of sellers. This could drive the market into the 50% level at $1870.30. Breaking this level will be a sign of weakness, but the move is likely to be labored because of a series of retracement levels at $1866.00, $1855.10, $1839.60 and $1822.50.

Side Notes

Volume is expected to be light so be careful buying strength and selling weakness because of the possibility of whip-saw action.

For a look at all of today’s economic events, check out our economic calendar.