Comex Gold Futures (GC) Technical Analysis – May 31, 2016 Forecast

A spike into the close on Friday by the U.S. Dollar sent August Comex Gold futures sharply lower. Somewhat hawkish comments from Fed Chair Janet Yellen was the catalyst behind the move.

Although gold is ripe for a short-term retracement rally due to oversold conditions, its direction will be determined by the movement in the dollar and the stock market. A higher dollar will pressure gold because it is a dollar-denominated asset and when the dollar rises, demand for gold falls. Stronger equity markets means money is flowing into stocks and away from assets like gold that don’t pay a dividend or interest.

Technically, the main trend is down according to the daily swing chart. The trend is in no danger of turning up, but the market is 10 days off its recent top which puts it in the window of time for a potentially bullish closing price reversal bottom.

Based on Friday’s close at $1216.70, the direction of the market today is likely to be determined by trader reaction to the steep downtrending angle at $1212.40.

A sustained move over $1212.40 will signal the presence of buyers. This could create enough upside momentum to trigger a rally into the nearest downtrending angle at $1228.00.

The angle at $1228.00 is the trigger point for an acceleration to the upside with the next major target coming in at $1252.40. In order to get to this angle over the short-run, there will have to be surprise news that weakens the dollar and/or stocks considerably.

A sustained move on the weak side of the steep downtrending angle at $1212.40 will put gold in an extremely bearish position. This could lead to the start of a sharp break with the next major target a 50% level at $1178.70.

Today, we’re going to watch the price action and order flow from the opening to see if the market can sustain a rally over $1212.40. We’ll be looking to play the long side into Friday’s U.S. Non-Farm Payrolls report if we see a lower-low, higher-close today.