June Comex Gold Tumbles Back Inside Near-Term Trading Range

Gold futures are down sharply on Tuesday as profit-takers took control following a test of the psychological $2000 level the previous session. Longs are being pressured to liquidate by high bond yields, the firm dollar and hawkish Fed policymaker chatter regarding the direction of interest rates.

At 14:28 GMT, June Comex gold futures are trading $1961.80, down $24.60 or -1.24%. The SPDR Gold Shares ETF (GLD) is at $182.85, down $1.76 or -0.95%.

Factors Capping Gains

The benchmark U.S. 10-year Treasury yield on Tuesday was just off its three-year high of 2.884% hit on Monday. Yields on 10-year U.S. inflation-linked bonds are within touching distance of turning positive for the first time in two years.

Expectations that the U.S. Federal Reserve will tighten its monetary policy have continued to provide support to the dollar.

U.S. inflation is “far too high”, St. Louis Federal Reserve President Bank James Bullard said on Monday as he repeated his case for increasing interest rates to 3.5% by the end of the year.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum is trending lower. A trade through $2003.00 will signal a resumption of the uptrend. A move through $1916.20 will change the main trend to down.

The minor trend is down. This is controlling the momentum. The minor trend turned down when sellers took out the minor bottom at $1962.70 earlier today.

The short-term range is $2082.00 to $1893.20. Its retracement zone at $1987.60 to $2009.90 is resistance. This zone stopped the selling at $2003.00 on Monday.

The market is currently trading inside the longer-term retracement zone at $1908.10 to $1958.70. This zone is being straddled by another retracement zone at $1932.90 to $1897.70. These two zones combine to make $1908.10 to $1897.70 the most important support on the chart.

Daily Swing Chart Technical Forecast

The direction of the June Comex gold futures contract into the close on Tuesday is likely to be determined by trader reaction to the long-term Fibonacci level at $1958.70.

Bearish Scenario

A sustained move under $1958.70 will indicate the presence of sellers. If this move continues to generate enough downside momentum then look for the selling to possibly extend into a 50% level at $1932.90.

Buyers could come in on the first test of $1932.90, but if it fails then look for the selling to possibly extend into the support cluster at $1908.10 to $1897.70.

Bullish Scenario

A sustained move over $1958.70 will signal the presence of buyers. If this creates enough upside momentum then look for a retest of the short-term retracement zone at $1987.60 to $2009.90.