Gold Price Futures (GC) Technical Analysis – Trader Reaction to 50% Level at $1746.90 Sets the Tone

Gold futures are edging lower on Monday shortly before the New York opening as firming U.S. Treasury yields supported the U.S. Dollar, while weighing on foreign demand for dollar-denominated gold. The selling pressure is likely the spillover effect from Friday’s better-than-expected U.S. Producer Prices Index (PPI) report that lifted prospects for higher inflation and interest rates.

At 10:17 GMT, June Comex gold is trading $1741.10, down $3.70 or -0.21%.

On Friday, the U.S. government reported that producer prices rose more than anticipated in March, resulting in the highest annual rise in 9-1/2 years and signaling the start of higher inflation as the economy reopens amid strengthened public health and substantial government assistance.

Some investors view gold as a hedge against higher inflation, but higher Treasury yields dampen some of the appeal of the non-yielding precious metal.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through $1759.40 will signal a resumption of the uptrend. The main trend will change to down on a trade through $1677.30.

The minor trend is also up. The new minor top is $1759.40.

Gold is currently trading inside a major retracement zone at $1711.90 to $1788.50. This zone is controlling the longer-term direction of gold prices.

The minor range is $1677.30 to $1759.40. Its 50% level at $1718.40 is potential support.

The short-term range is $1817.60 to $1676.20. The market is currently testing its 50% level at $1746.90.

The main range is $1858.90 to $1676.20. Its 50% level at $1767.60 is potential resistance.

Daily Swing Chart Technical Forecast

The early price action suggests the direction of the June Comex gold futures contract on Monday is likely to be determined by trader reaction to $1746.90.

Bullish Scenario

A sustained move over $1746.90 will indicate the presence of buyers. If this creates enough upside momentum then look for a surge into $1759.40, followed by $1767.60. The latter is a potential trigger point for an acceleration into $1788.50.

Bearish Scenario

A sustained move under $1746.90 will signal the presence of sellers. This could create the downside momentum needed to challenge $1718.40, followed closely by $1711.90.

Taking out the long-term Fibonacci level at $1711.90 could trigger an acceleration to the downside with the next target the main bottom at $1677.30.