Gold futures are trading lower shortly after the regular session opening after failing to follow-through to the upside following yesterday’s potentially bullish closing price reversal bottom. The catalysts behind today’s decline is a stronger U.S. Dollar and lower demand for riskier assets. Bullion is set to post its steepest weekly contraction since mid-August, falling 4.1%.
At 12:39 GMT, December Comex gold is trading $3225.00, down $13.00 or -0.40%.
Gold posted a closing price reversal bottom on Thursday after the dollar index rally into a two-month high lost steam as it approached a key resistance area. Nonetheless, the dollar remained on course for its biggest weekly gains since early April.
The news that the Democrats were working on a $2.4 trillion stimulus package, after U.S. Fed officials urged for more fiscal stimulus, offered some respite to investors’ hopes.
The main trend is down according to the daily swing chart, however, momentum may be getting ready to shift to the upside with the formation of the closing price reversal bottom on Thursday.
A trade through $1851.00 will negate the closing price reversal top and signal a resumption of the downtrend.
A move through yesterday’s high at $1880.90 will confirm the closing price reversal bottom. The move won’t change the main trend to up, but it could trigger the start of a 2 to 3 day counter-trend rally.
The main range is $1690.10 to $2089.20. Its retracement zone at $1889.70 to $1842.60 is currently being tested. Trader reaction to this zone will determine the longer-term direction of the market.
The minor range is $1983.80 to $1851.00. Its 50% level at $1917.40 is the first potential upside target.
Based on the early price action, the direction of the December Comex gold futures contract on Friday is likely to be determined by trader reaction to $1851.10 and $1880.90.
A sustained move under $1851.10 will negate the closing price reversal bottom and signal a resumption of the downtrend. This should lead to a test of the Fibonacci level at $1842.60. This is a potential trigger point for an acceleration into a main bottom at $1819.30.
Taking out $1880.90 will confirm the closing price reversal top. This could lead to a quick test of the main 50% level at $1889.70. This is a potential trigger point for an acceleration to the upside with $1917.40 the next potential upside target. #gold##XAU/USD#
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