Gold Price Futures (GC) Technical Analysis – Price Action Being Controlled by Treasury Yields

Gold futures gapped lower on Monday in reaction to a jump in U.S. Treasury yields and increased demand for riskier assets. The catalyst behind the weakness was the resumption of trade talks between the United States and China.

Over the week-end, U.S. President Donald Trump and Chinese President Xi Jinping agreed to resume the trade talks after Trump promised to refrain from placing any additional tariffs on Chinese goods, and Xi promised to buy more U.S. soybeans.

The news could reduce the chances of a Fed rate cut in July because it may encourage central bank policymakers to continue with their “wait and see” approach. In the meantime, investors will be keeping an eye on this week’s U.S. manufacturing and services reports as well as Friday’s U.S. Non-Farm Payrolls data.

At 01:30 GMT, August Comex gold is trading $1396.80, down $16.80 or -1.19%. This is up from an earlier low of $1387.00.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum shifted to the downside earlier today. A trade through $1442.90 will signal a resumption of the uptrend, while a move through $1323.60 will change the main trend to down.

The minor trend is down. This shifted momentum to the downside. The trend changed to down when sellers took out $1401.40. A new main top was formed at $1427.80 in the process. Taking out this minor top will change the minor trend back to up and shift momentum back to the upside.

The short-term range is $1323.60 to $1442.90. Its retracement zone at $1383.30 to $1369.20 is the first downside target. Since the main trend is up, buyers are likely to come in on the first test of this zone.

The main range is $1274.60 to $1442.90. If the short-term retracement zone fails as support then look for the selling to continue into the main retracement zone at $1358.80 to $1338.90.

Daily Swing Chart Technical Forecast

Based on the early price action, the direction of the August Comex gold futures contract the rest of the session is likely to be determined by trader reaction to the short-term 50% level at $1383.30.

Bullish Scenario

A sustained move over $1383.30 will indicate that buyers are coming in to defend the retracement zone and the uptrend. If this move creates enough upside momentum then look for the rally to continue into $1427.80. This is a potential trigger point for an acceleration into $1442.90.

Bearish Scenario

A failure to hold $1383.30 will signal the presence of sellers. If this creates enough downside momentum then look for the selling to possibly extend into the short-term Fibonacci level at $1369.20, followed by the main 50% level at $1358.80. The latter is a potential trigger point for an acceleration into the main Fibonacci level at $1338.90.

Overview

The direction of Treasury yields will determine which way gold move. If yields rise rapidly then look for further weakness in gold.