Gold Price Futures (GC) Technical Analysis – Reversal Bottom Could Trigger Start of Counter-Trend Rally

Gold futures are trading higher late Tuesday as the U.S. Dollar remained under pressure, with prospects for more stimulus buoying bullion’s appeal as an inflation hedge.

Comments from Janet Yellen, U.S. President Joe Biden’s nominee for Treasury Secretary, kept the gold market well supported throughout the session. Yellen told Senate lawmakers at her confirmation hearing on Tuesday that the value of the U.S. Dollar should be determined by markets.

Yellen also reaffirmed her commitment to relief measures and underlined the depth of the economic crisis.

At 20:11 GMT, February Comex gold is trading $1838.70, up $8.80 or +0.48%.

In other news, the U.S. Dollar slipped against a basket of currencies from a four-week high hit in the last session, making dollar-denominated gold cheaper for foreign investors.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart, but momentum may be getting ready to shift to the upside with the formation of a closing price reversal bottom on Tuesday.

A trade through $1962.50 will change the main trend to up. This is highly unlikely, but a change in the minor trend is possible. A move through $1800.80 will signal a resumption of the downtrend.

The minor trend is down. A trade through $1864.00 will change the minor trend to up. This will also shift momentum to the upside.

The main support is a long-term retracement zone at $1780.50 to $1705.20. This area stopped the selling on November 30 at $1767.20.

The short-term range is $1767.20 to $1962.50. Its 50% level at $1864.90 is the first upside target.

The minor range is $1962.50 to $1800.80. Its 50% level at $1881.70 is another potential upside target. Since the main trend is down, sellers could come in on a test of this level.

Short-Term Outlook

The direction of the February Comex gold market into the close is likely to be determined by trader reaction to Friday’s close at $1829.90.

Bullish Scenario

A sustained move over $1829.90 will indicate the presence of buyers. If this creates enough upside momentum then look for the rally to possibly extend into a resistance cluster at $1864.00 to $1864.90, followed by $1881.70.

Look for sellers on the first test of $1881.70, but be prepared for an acceleration to the upside if this level is taken out with conviction.

Bearish Scenario

A sustained move under $1829.90 will signal the presence of sellers. This could trigger a break into the intraday low at $1800.80, followed by the major 50% level at $1780.50.

Side Notes

A close over $1829.90 will form a potentially bullish closing price reversal bottom. If confirmed, this could trigger the start of a 2 to 3 day counter-trend rally.