June Comex Gold Monthly Technical Analysis for May 2016

June Comex Gold futures closed near a 15-month high in April, finishing at $1290.50, up $54.90 or +4.44%. A steep drop in the U.S. Dollar and weakness in the global equity markets pushed up the precious metal to near $1,300 an ounce.

After trading mostly sideways to lower throughout April, gold prices surged the last few days of the month after the U.S. Dollar slumped to an 18-month low against the Japanese Yen. The US Dollar Index, which measures the Greenback against a basket of six major currencies, fell for a sixth straight session to hit an eight-month low.

Gold rallied during the last week in April after the Bank of Japan’s decision not to ease policy further. Gold was also underpinned by weak U.S. economic data that supported the Federal Reserve’s cautious stance on higher U.S. interest rates. The central bank’s latest monetary policy statement released last week was viewed as largely dovish.

Technically, the main trend is down according to the monthly swing chart, however, momentum and investor sentiment has shifted to the upside. The main trend will turn up when the swing top at $1309.00 is taken out.

The main range is $1851.50 to $1047.20. Its retracement zone at $1449.40 to $1544.30 is the primary upside target.

The short-term range is $1395.50 to $1047.20. Its retracement zone is $1221.30 to $1262.40. The close over this zone also indicates a strong upside bias.

Based on the close at $1290.50, the direction of gold during May will be determined by trader reaction to the Fib level at $1262.40 and the main top at $1309.00.

A sustained move over the main top at $1309.00 will indicate the presence of buyers. This could create enough upside momentum to challenge the next main top at $1350.20. This is followed by the steep uptrending angle at $1367.20. Crossing to the strong side of this angle will put gold in an extremely bullish position.

The inability to sustain a rally over $1309.00 will indicate the presence of sellers. This could lead to a test of $1262.40. Falling below this level will mean the selling pressure is getting stronger. This level is followed by a 50% price at $1221.30.

Look for a bullish tone to develop on a sustained move over $1309.00 and a bearish tone on a sustained move under $1262.40.

This market is being driven by the direction in the U.S. Dollar. Since there isn’t a Fed meeting this month, economic news will move the dollar and consequently the gold market.