June Comex Gold Changes Trend to Down in Volatile Trade

Gold futures are edging higher on Wednesday after hitting its lowest level since February 25 during yesterday’s volatile trading session. The market is being supported by an overnight drop in U.S. Treasury yields and a weaker U.S. Dollar.

Gains could be limited, however, as peace talks dampened the precious metal’s appeal as a safe-haven asset. Bearish traders may be placing bets on hopes for a negotiated end to the Ukraine conflict.

At 06:44 GMT, June Comex gold futures are trading $1928.20, up $10.20 or +0.53%. On Tuesday, the SPDR Gold Shares ETF (GLD) settled at $179.14, up $0.08 or +0.04%.

Main Catalysts:  Lower Yields, Dollar Dip

The U.S. benchmark 10-year Treasury yield slipped from nearly three-year highs reached earlier in the week. Lower yields decrease the opportunity cost of holding non-yielding bullion.

Meanwhile, the U.S. Dollar Index is currently trading on the weak side of its long-term support at 98.200. This is making dollar-denominated gold less expensive and more attractive for foreign traders.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down on Tuesday when sellers took out the previous main bottom at $1900.40. A trade through $1972.50 will change the main trend to up.

Despite the volatile sell-off this week, the gold market remains inside a long-term retracement zone at $1908.10 to $1958.70 and an intermediate retracement zone at $1932.90 to $1897.70.

The combination of these two zones creates a support cluster at $1908.10 to $1897.70. This zone proved to be important support on Tuesday.

The new short-term range is $2082.00 to $1893.20. If the main trend changes to up then its retracement zone at $1987.60 to $2009.90 will become the primary upside target.

Daily Swing Chart Technical Forecast

The direction of the June Comex gold futures contract on Wednesday is likely to be determined by trader reaction to $1932.90.

Bearish Scenario

A sustained move under $1932.90 will indicate the presence of sellers. If this move creates enough downside momentum then look for a retest of the support cluster at $1908.10 – $1897.70, followed by yesterday’s low at $1893.20.

The first target under $1893.20 is the main bottom at $1882.00. Taking out this level will reaffirm the downtrend and could trigger an acceleration to the downside.

Bullish Scenario

A sustained move over $1932.90 will signal the presence of buyers. If this move generates enough upside momentum then look for the rally to possibly extend into $1958.70, followed by $1972.50.

Taking out $1972.50 will change the main trend to up with $1987.60 – $2009.90 the primary upside target.

Side Notes

Sellers took their first shot at taking out the key support at $1897.70 on Tuesday, but value buyers were waiting at $1893.20, bringing a quick end to the move. The price action also suggests that short-sellers may not be interested in selling weakness, but would rather sell rallies.