April Gold Direction Determined by Reaction to $1899.80

Gold is trading lower on Tuesday after touching its highest level since June earlier in the session. Given the start of a possible war in Ukraine, the price action suggests a “buy the rumor, sell the fact” situation may be taking place.

Speculators have been driving gold higher for weeks in anticipation of a Russian invasion of Ukraine. On Monday, President Vladimir Putin recognized two breakaway regions in eastern Ukraine, deepening Western fears of a new way in Europe.

However, gold prices fell after the news, suggesting investors may be discounting the size and duration of a possible war. The inability to follow-through to the upside on the new development may have encouraged investors to trim long positions and take profits.

At 12:10 GMT, April Comex gold is trading $1897.60, down $2.20 or -0.12%. This is down from a top of $1918.30. On Friday, the SPDR Gold Shares ETF (GLD) settled at $177.13, down $0.12 or -0.07%.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $1918.30 will signal a resumption of the uptrend. A move through $1821.10 will change the main trend to down.

The minor trend is also up. A move through $1845.40 will change the minor trend to down. This will shift momentum.

On the upside, the major resistance is the long-term retracement zone at $1899.80 to $1951.00. This area stopped the rally at $1918.30 on February 22.

On the downside, the nearest support is a minor pivot at $1881.90, followed by a minor retracement zone at $1869.70 to $1858.20.

The best support is the short-term retracement zone at $1849.50 to $1833.20.

Short-Term Outlook

The direction of the April Comex gold market on Tuesday is likely to be determined by trader reaction to $1899.80.

Bullish Scenario

A sustained move over $1899.80 will indicate the presence of buyers. If this move can generate enough upside momentum then look for the rally to possibly extend into $1918.30. This price is a potential trigger point for an acceleration into the major Fibonacci level at $1951.00.

Bearish Scenario

A sustained move under $1899.80 will signal the presence of sellers. This could lead to a labored break with potential support levels lined up from $1881.90 to $1833.20. The more important support zones come in at $1869.70 to $1858.20 and $1849.50 to $1833.20.

Side Notes

A close under $1899.80 on Tuesday will form a potentially bearish closing price reversal top. If confirmed, this could trigger the start of a 2 to 3 day correction.