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James Hyerczyk

Gold futures are down nearly 1.5% on Tuesday as major global economies further eased coronavirus-led restrictions fueling hopes of economy recovery and bolstering risk appetite. Traders also said the earlier openings could lessen the effects of the widely expected global recession.

Gold prices could break sharply over the near-term if progress continues to be made toward a coronavirus vaccine. Furthermore, the stock market rally is being driven by tremendous amounts of fiscal and monetary stimulus, the same stimulus that long-term gold traders are counting on to cause inflation.

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At 17:51 GMT, August Comex gold is trading $1727.10, up $26.40 or +1.51%.

The price action suggests that the gold market has fully absorbed the current levels of stimulus from the major governments and central banks so prices could weaken into a value area as traders wait for events such as a second-wave of coronavirus infections, an escalation of tensions between the United States and China, or more stimulus to feed the longer-term strength.

As long as recession fears abate, gains could be capped, making gold vulnerable to price consolidation or lower prices.

Daily Short-Term Technical Analysis

The main trend is up according to the daily swing chart, however, momentum has been trending lower since the formation of the closing price reversal top on May 18.

A trade through $1787.50 will negate the closing price reversal top and signal a resumption of the uptrend. The main trend will change to down on a trade through $1683.30.

The minor trend is down. This confirmed the shift in momentum to down. A trade through $1770.10 will shift momentum to the upside.

The short-term range is $1789.00 to $1668.40. Its 50% level at $1728.70 is controlling the near-term direction of the market.

The main range is $1454.80 to $1789.00. Its retracement zone at $1621.90 to $1582.40 remains a major downside target.


Daily Short-Term Technical Forecast

Based on the early price action and the current price at $1727.10, the direction of the August Comex gold futures contract the rest of the session on Tuesday is likely to be determined by trader reaction to $1728.70.

Bearish Scenario

A sustained move under $1728.70 will indicate the presence of sellers. If this move generates enough downside momentum then look for the selling to possibly extend into $1705.00, followed by $1683.30.

Bullish Scenario

A sustained move over $1728.70 will signal the presence of buyers. This could trigger a short-term rally into $1754.80, followed by $1770.10.

For a look at all of today’s economic events, check out our economic calendar.

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