Gold Price Futures (GC) Technical Analysis – Trader Reaction to $1727.50 Continues to Set the Tone

Gold is trading flat-to-lower late Wednesday following the release of the U.S. Federal Reserve monetary policy statement and interest rate decisions. The catalysts behind the late session weakness is optimism around the easing of coronavirus-led lockdowns and hopes of a potential treatment drug that is propping up demand for higher-yielding assets.

Additionally, the U.S. Federal Reserve’s promise to keep interest rates near zero until it is comfortable that the U.S. economy is back on its feet and full employment has returned, also weighed on demand for gold because bullish traders were hoping the Fed would say it was willing to go negative with rates.

At 18:47 GMT, June Comex gold is trading $1719.00, down $3.25 or -0.20%.

The news is potentially bearish over the short-run because the Fed didn’t hint at any major changes to current policy. Longer-term, however, the outlook is still bullish with Fed Chair Jerome Powell saying more stimulus is needed to ensure a robust economic recovery from the coronavirus crisis.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, the formation of a secondary lower top suggests momentum may be getting ready to shift to the downside.

The main trend will change to down on a trade through the last main bottom at $1666.20. A move through the two main tops at $1764.20 and $1788.80 will signal a resumption of the uptrend.

The minor range is $1788.80 to $1666.20. Its 50% level or pivot at $1727.50 has been controlling the direction of the market so far this week.

The short-term range is $1576.00 to $1788.80. Its retracement zone at $1682.40 to $1657.30 is the next potential downside target.

The intermediate range is $1453.00 to $1788.80. Its retracement zone at $1620.90 to $1581.30 is a major support area.

Short-Term Outlook

Based on the early price action and the current price at $1719.00, the direction of the June Comex gold futures contract into the close on Wednesday is likely to be determined by trader reaction to the pivot at $1727.50.

Bearish Outlook

A sustained move under $1727.50 will indicate the presence of sellers. If this creates enough downside momentum then look for the selling to possibly extend into $1682.40 then $1666.20 and $1657.30.

Bullish Outlook

A sustained move over $1727.50 will signal the presence of buyers. If this move can generate enough upside momentum then look for a retest of $1764.20 and $1788.80.