June Gold Buyers Could Face Challenge at $1987.60 – $2009.90

Comex gold futures hit their highest level since March 14 on Wednesday as they neared a major 50% to 61.8% retracement zone that could determine the near-term direction of the market.

The catalysts behind the market’s strength are demand for a hedge against soaring inflation amid the Russia-Ukraine war, easing pressure from expectations of an aggressive U.S. interest rate hike and an intraday reversal top by the U.S. Dollar.

At 18:32 GMT, June Comex gold futures are trading $1982.70, up $6.60 or +0.33%. The SPDR Gold Shares ETF (GLD) is at $184.66, up $0.89 or +0.48%.

Gold is considered a hedge against inflation and geopolitical risks. However, rising U.S. interest rates would raise the opportunity cost of holding non-yielding bullion and boost the greenback in which it is priced.

However, the price action suggests gold buyers are looking for protection against inflation and not necessarily too concerned at this time about opportunity costs. Despite all the hawkish talk and expectations of aggressive rate hikes from the Fed, we have yet to see a change in the direction of inflation.

Gold is likely to remain underpinned as long as the inflation arrow is pointed up and the war in Ukraine continues.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. A trade through the intraday high at $1985.50 will reaffirm the uptrend. A move through $1916.20 will change the main trend to down.

On the upside, the nearest target is the retracement zone at $1987.60 to $2009.90.

On the downside, the first support is the long-term Fibonacci level at $1958.70, followed by the short-term 50% level at $1932.90.

Daily Swing Chart Technical Forecast

The direction of the June Comex gold into the close on Wednesday is likely to be determined by trader reaction to the 50% level at $1987.60.

Bullish Scenario

A sustained move over $1987.60 will indicate the presence of buyers. This could generate the momentum needed to challenge the Fibonacci level at $2009.90. This is a trigger point for an acceleration to the upside.

Bearish Scenario

A sustained move under $1987.60 will signal the presence of sellers. They are going to try to form a secondary lower top. If successful, this could trigger a break into $1958.70.