Gold futures posted a potentially bearish closing price reversal top last week. Although the chart pattern does not indicate a change in the main trend, it does signal that the selling is greater than the buying at current price levels. The catalyst behind the selling pressure was the stronger U.S. Dollar. A steep plunge in the Euro last week drove the dollar higher, which led to a drop in foreign demand for dollar denominated gold futures. Firmer Treasury yields toward the end of the week also contributed to gold’s weakness as well as increased demand for higher yielding assets like stocks.
Last week, December Comex gold settled at $1529.40, down $8.20 or -0.53%.
Weekly Swing Chart Technical Analysis
The main trend is up according to the weekly swing chart. However, the closing price reversal top is signaling a potential shift in momentum to the downside.
A trade through $1525.60 will confirm the closing price reversal top. This will shift momentum to the downside and may trigger the start of a 2 to 3 week correction.
A move through $1565.00 will negate the closing price reversal top and signal a resumption of the uptrend.
The minor trend is also up. Taking out the minor bottoms at $1412.10 and $1396.40 will change the minor trend to down. This will confirm the shift in momentum.
The main trend will actually change to down on a trade through $1285.10.
The minor range is $1412.10 to $1565.00. Its retracement zone at $1488.60 to $1470.50 is the first downside target. Since the trend is up, buyers could come in on a test of this area.
The main range is $1285.10 to $1565.00. Its retracement zone at $1425.10 to $1392.00 is the next downside target. The major retracement zone is $1386.80 to $1344.70.
Weekly Swing Chart Technical Forecast
A sustained move over $1525.60 will indicate the presence of buyers. If this move can create enough upside momentum then look for the rally to possibly extend into the closing price reversal top at $1565.00.
The first move down from $1565.00 stopped at $1525.60 so its 50% level or pivot at $1545.30 could provide some minor resistance.
A sustained move under $1525.60 will signal the presence of sellers. This could trigger an acceleration to the downside with the first target zone coming in at $1488.60 to $1470.50. Watch for a technical bounce on the first test of this area.
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