Gold Price Futures (GC) Technical Analysis – Divergence from Dollar Could Spike Prices Higher

Gold futures are edging higher on Wednesday after failing to follow-through to the downside, following yesterday’s steep sell-off. Traders are not responding to the stronger U.S. Dollar Index, but are likely being underpinned by a drop in Treasury yields and slightly lower demand for risky assets. The divergence between gold and the U.S. Dollar could be read as constructive. This may not lead to a change in trend, but it could trigger a 2 to 3 day short-covering rally.

At 14:27 GMT, June Comex Gold futures are trading $1276.40, up $3.30 or +0.25%.

Daily Technical Analysis

The main trend is down according to the daily swing chart. A trade through $1267.90 will signal a resumption of the downtrend. The main trend will change to up on a move through $1314.70. This is highly unlikely today, but there is room to the upside for a short-term 50% to 61.8% retracement.

The minor trend is down according to the daily swing chart. A trade through $1281.90 will change the minor trend to up. This will also shift momentum to the upside.

The major support is the long-term retracement zone at $1272.70 to $1253.00.

The short-term range is $1314.70 to $1267.90. If the minor trend changes to up then look for the rally to possibly extend into its retracement zone at $1291.30 to $1296.80.

Daily Technical Forecast

Based on the early trade, the direction of the June Comex Gold futures contract is likely to be determined by trader reaction to the long-term uptrending Gann angle at $1274.80.

Bullish Scenario

A sustained move over $1274.80 will indicate the presence of sellers. The first upside target is a downtrending Gann angle at $1278.70. Sellers could come in on the first test of this angle. Overtaking it, however, could trigger a further rally into the minor top at $1281.90.

Taking out $1281.90 will not only change the minor trend to up, but it could also trigger a surge into a downtrending Gann angle at $1288.80, followed by the short-term 50% level at $1291.30.

Bearish Scenario

A sustained move under $1274.80 will signal the presence of sellers. The first downside target is the major 50% level at $1272.70. If this fails then look for the selling to extend into yesterday’s low at $1267.90.

Look for an acceleration to the downside if $1267.90 fails as support. The daily chart indicates there is room to the downside with $1253.00 the next target.