Comex gold futures are edging higher on Thursday despite a rise in U.S. Treasury yields and a firm U.S. Dollar. With Treasury bonds and the Japanese Yen under pressure, there are no signs of safe-haven buying so we have to conclude that the underlying strength in gold is being fueled by worries over inflation.
Earlier in the week, Federal Reserve Chair Jerome Powell promised the central bank would be more aggressive in fighting inflation, perhaps raising rates by 50-basis points at its next two meetings.
The remark pressured stocks and drove Treasury yields sharply higher. However, gold traders were unfazed. They may have interpreted Powell’s comments as a warning that inflation is or about to get out of control especially if the war in Ukraine continues to drive energy prices higher. This may be what is underpinning gold at this time.
Furthermore, gold appears to be finding support in a 50% – 61.8% value zone after the “war premium” was erased. This could be a sign that professionals are accumulating gold before the next rally.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. A trade through $1900.40 will change the main trend to down. A move through $2082.00 will reaffirm the uptrend.
The minor trend is also up. A trade through $1915.50 will change the minor trend to down. This will shift momentum to the downside.
The market has been testing a pair of retracement zones for the last eight sessions. This suggests accumulation, investor indecision and impending volatility.
The long-term retracement zone is $1908.10 to $1958.70. The intermediate-term retracement zone is $1932.90 to $1897.70. The two zones combine to form a support cluster at $1908.10 – $1897.70. This cluster stopped the selling at $1900.40 on March 16.
The short-term range is $2082.00 to $1900.40. Its retracement zone at $1991.20 to $2012.60 is the primary upside target.
Daily Swing Chart Technical Forecast
The early price action suggests the direction of the June Comex gold market into the close on Thursday will be determined by trader reaction to $1958.70.
A sustained move over $1958.70 will indicate the presence of buyers. If this move creates enough upside momentum then look for an acceleration into $1991.20 – $2012.60.
A sustained move under $1958.70 will signal the presence of sellers. This could lead to a labored break with potential targets lined up at $1932.90, $1915.50 and the support cluster at $1908.10 – $1897.70.
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This article was originally posted on FX Empire