June Gold Held in Range by $1897.70 and $1958.70
Gold futures are lower late Tuesday amid a steep climb in U.S. Treasury yields. The precious metal is extremely sensitive to higher interest rates because they increase the opportunity cost of holding the non-yielding asset, driving down demand.
Recently gold prices dropped $182.00 in six-sessions, erasing the Ukraine-Russia War premium. Today’s selling pressure that drove prices to nearly a one-week low is being fueled by hawkish comments from U.S. Federal Reserve Chair Jerome Powell on Monday. Powell sent Treasury yields higher after he hinted at big rate hikes this year to fight against soaring inflation.
Powell said policymakers needed to move “expeditiously” as inflation runs hot, and he raised the possibility of 50 basis point (bps) hikes. Normally, this type of comment would have produced double-digit losses in the gold market, however, losses have been limited because of safe-haven buying tied to the war in Ukraine.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. A trade through $1882.00 will change the main trend to down. A move through $2082.00 will signal a resumption of the downtrend.
The minor trend is up. A trade through $1900.40 will change the minor trend to down. This will shift momentum. A move through the minor top at $1955.60 will indicate the return of buyers.
Prices have been moving sideways the past four sessions because gold is trapped inside a couple of major retracement zones at $1908.10 to $1958.70 and $1897.70 to $1932.90.
June Comex gold isn’t going to make a major move over the short-run until it breaks away from the retracement zones capping gains and limiting losses.
On the upside, a sustained move over $1958.70 will indicate the buying is getting stronger. This could lead to a quick test of the short-term retracement zone at $1991.20 to $2012.60.
On the downside, a sustained move under $1897.70 will indicate the presence of strong sellers. This could drop prices into the main bottom at $1882.00. This price is a potential trigger point for an acceleration to the downside with $1824.40 the next major target.
Short-term traders may want to watch the price action around $1932.90 and $1921.50 for an early clue as to the market’s next major move.