Gold Price Futures (GC) Technical Analysis – Trader Reaction to $1844.00 Sets Early Tone Tuesday

Gold futures finished sharply lower on Monday. The catalyst behind the steep sell-off was a surge in U.S. Treasury yields and a soaring U.S. Dollar. Both moves were fueled by increased bets for steep interest rate hikes by the U.S. Federal Reserve following its two-day meeting on Wednesday.

August Comex gold futures settled at $1831.80, down $43.70 or -2.33%. The SPDR Gold Shares ETF (GLD) finished at $169.99, down $4.55 or -2.61%.

Fed to Move More Aggressively

Short-term rates jumped on Monday, driving down demand for non-yielding gold. The benchmark 10-year Treasury rose 20 basis points higher to 3.35%, as investors continued to bet the Fed may have to get more aggressive to squash inflation.

The 2-year Treasury yield was last up 23 basis points to 3.28% and earlier traded above its 10-year counterpart for the first time since April, a so-called yield curve inversion seen as an indicator of a recession.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through $1882.50 will change the main trend to up. A move through the nearest main bottom at $1792.00 will reaffirm the downtrend.

Gold settled inside the minor retracement zone at $1837.30 – $1826.60.

On the upside, the major resistance is the long-term Fibonacci level at $1844.00, followed by a short-term 50% level at $1854.80. Another major resistance level is the long-term 50% level at $1890.00.

Near-Term Outlook

Trader reaction to the long-term Fibonacci level at $1844.00 is likely to determine the near-term direction of the August Comex gold market.

Bearish Scenario

A sustained move under $1844.00 will indicate the presence of sellers. However, the trigger point for an acceleration to the downside is the minor Fibonacci level at $1826.60. Taking out this level could trigger the start of a steep correction into the support cluster at $1792.00 – $1787.80.

Bullish Scenario

A sustained move over $1844.00 will signal the presence of buyers. The first target is a 50% level at $1854.80. Taking out this level could trigger an acceleration into $1882.50.

Longer-term, the market is going to have to overcome the long-term 50% level at $1890.00 in order to attract aggressive buyers.