Gold Price Futures (GC) Technical Analysis – Price Spike Makes $1610.50 – $1580.40 New Higher SupportIf buyers have regained control of gold then they are going to vigorously defend $1610.50 to $1580.40 and the retracement zone will become support. That is the zone that you should be focusing on at this time.
Gold futures in New York soared for a second session on Tuesday on continued reaction to the U.S. Federal Reserve’s extraordinary measures to help an economy ravished from the coronavirus pandemic.
The U.S. central bank revealed on Monday an unprecedented array of programs including lending against student loans, credit card loans and U.S. government backed-loans to small businesses.
Forget the details. As a gold investor, all you should be concerned about is the number of U.S. Dollars or cash the measures are injecting into the financial system. More U.S. Dollars floating around generally leads to a weaker dollar and consequently more foreign demand for dollar-denominated gold.
Furthermore, although U.S. stocks didn’t rally immediately on the news, they have somewhat stabilized, which dampens the possibility of selling in gold to raise money to meet stock-related margin calls.
At 17:38 GMT, June Comex gold is trading $1663.00, up $90.30 or +5.74%.
Daily Technical Analysis
The main trend is down in gold, but momentum has shifted to the upside. The trend will turn up on a trade through the multi-year high at $1707.80. A trade through $1453.00 will signal a resumption of the downtrend.
This rally started when gold found support inside its contract 50% to 61.8% retracement zone at $1473.00 to $1417.50 on March 16 at $1453.00.
The short-term range is $1707.80 to $1453.00. The rally accelerated earlier today when the market crossed to the strong side of its retracement zone at $1610.50 to $1580.40. This zone is new support.
Normally, when the trend is down, sellers come in on a test of the first retracement zone down from the last main top. In this case, $1580.40 to $1610.50 is the retracement zone and $1707.80 is the main top. The sellers come in because they are trying to form a secondary lower top, which is usually a pretty strong sign that the shorts are taking control of the market.
However, on Tuesday, pent up buyers blew out those short-sellers attempting to make the secondary lower top. Therefore, we conclude that a combination of new buying and short-covering led to the spike in prices.
If buyers have regained control of gold then they are going to vigorously defend $1610.50 to $1580.40 and the retracement zone will become support.
That is the zone that you should be focusing on at this time.