Gold Price Futures (GC) Technical Analysis – Rate Hike Driven Recession Fears Fuel Whipsaw Rebound

Gold futures are trading higher at the mid-session on Friday in a volatile session, highlighted by a $53.10 trading range. Early in the session, the market was driven into its lowest level since May 19 after the release of the U.S. consumer price index report. When the selling stopped, new buying and short-covering fueled a rebound rally into a one week high as economic fears grew.

At 17:02 GMT, August Comex gold is trading $1876.50, up $23.70 or +1.28%. The SPDR Gold Shares ETF (GLD) is at $174.65, up $2.42 or +1.41%.

Jump in US Consumer Inflation Signals Need for Aggressive Fed Rate Hikes …

U.S. consumer prices accelerated in May, suggesting the Federal Reserve could continue with its 50 basis points rate hikes through September. This drove gold prices sharply lower.

But Aggressive Rate Hike Could Start Recession

But gold prices stabilized and shot to the upside as traders assessed the economic repercussions from high inflation and aggressive rate hikes – including a recession. The short-covering rally was also fueled by the news that the University of Michigan’s survey showed U.S. consumer sentiment plunged to a record low in early June amid soaring gasoline prices.

Gold, Yields and Dollar Post Strong Gains

This is one of those rare days when rising Treasury yields and a strong U.S. Dollar failed to dampen demand for non-interest bearing, dollar-denominated bullion.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart after turning lower earlier in the session. A trade through the intraday high of $1979.60 will signal a resumption of the uptrend. A move through $1826.50 will change the main trend to down.

Support is a pair of 50% levels at $1854.80 and $1835.30. Inside this range is the most important support, the long-term Fibonacci level at $1844.00.

On the upside, the nearest resistance is a pair of 50% levels at $1890.00 and $1900.30.

Daily Swing Chart Technical Forecast

Due to the volatility, trader reaction to $1844.00 is likely to determine the direction of the August Comex gold futures market into the close on Friday.

Bullish Scenario

A sustained move over $1844.00 will indicate the presence of buyers. If this creates enough upside momentum to take out the intraday high at $1879.60 then look for the buying to possibly extend into $1890.00 and $1900.30.

Bearish Scenario

A sustained move under $1844.00 will be a sign of weakness. This could lead to a retest of $1835.30 and the intraday low at $1826.50. The latter is a potential trigger point for an acceleration into the support cluster at $1792.00 – $1787.80.