Based on last week’s price action and the close at $1288.80, the direction of the June Comex gold futures contract is likely to be determined by trader reaction to last week’s high at $1290.90.
Gold futures rebounded from early session weakness to post a potentially bullish closing price reversal bottom last week. Despite the strong U.S. Dollar, which hit a 2-year high last week, gold prices rallied because of a drop in U.S. Treasury yields. They were part of global weakness in the government debt markets that started after the release of weaker-than-expected German economic data.
Last week, June Comex gold settled at $1288.80, up $1280.80 or +1.00%.
The main trend is down according to the weekly swing chart. However, last week’s closing price reversal bottom indicates momentum may be getting ready to shift to the upside. A trade through $1290.90 will confirm the chart pattern. This could trigger the start of a 2 to 3 week counter-trend rally. A move through $1267.90 will negate the chart pattern and signal a resumption of the downtrend.
The main trend will change to up on a trade through $1330.80. This is followed by another main top at $1356.00.
The main range is $1189.30 to $1356.00. Its retracement zone at $1272.70 to $1253.00 provided support.
The intermediate range is $1215.00 to $1356.00. Its retracement zone at $1285.50 to $1268.90 is additional support.
The short-term range is $1356.00 to $1267.90. Its retracement zone at $1312.00 to $1322.30 is the next potential upside target. Since the main trend is down, sellers could come in on a test of this zone.
The major retracement zone resistance is $1299.80 to $1325.90. This zone is controlling the longer-term direction of the market.
Based on last week’s price action and the close at $1288.80, the direction of the June Comex gold futures contract is likely to be determined by trader reaction to last week’s high at $1290.90.
Taking out $1290.90 will confirm last week’s closing price reversal bottom. A sustained move over this level will indicate the presence of buyers. This could trigger a surge into the major 50% level at $1299.80.
Overcoming $1299.80 will indicate the buying is getting stronger. This could trigger a further rally into another 50% level at $1312.00 and a downtrending Gann angle at $1316.00.
Since the main trend is down, look for selling opportunities on tests of the retracement levels.
The inability to overcome $1290.90 will signal the presence of sellers. Crossing to the weak side of the 50% level at $1285.50 will indicate the selling pressure is getting stronger. This could drive the gold market into a support cluster at $1272.70, $1268.90, last week’s low at $1267.90 and an uptrending Gann angle at $1263.30.
Look for an acceleration to the downside if $1263.30 fails as support with $1253.00 the next likely downside target. This is another trigger point for an even steeper decline with $1215.00 the next major downside target.
James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.