June Gold: Trade Through $1932.90 Puts $1908.10 on Radar

Gold futures are down at the mid-session on Friday, off its intraday low. Nonetheless, the market is still in a position to post its largest weekly loss since mid-March.

The catalysts behind the weakness are fears of an aggressive series of interest rate hikes by the U.S. Federal Reserve and a spike to the upside by the U.S. Dollar against a basket of major currencies.

A hike in interest rates to rein in the hot inflation increases the opportunity cost of holding non-yielding bullion, while a stronger U.S. Dollar reduces foreign demand for the dollar-denominated asset.

At 16:35 GMT, June Comex gold futures are trading $1939.10, down $9.10 or -0.47%. The SPDR Gold Shares ETF (GLD) is at $180.83, down $1.25 or -0.69%.

The Bearish Catalysts

Fed Chairman Jerome Powell said on Thursday a half-point interest rate increase “will be on the table” when the central bank meets in May.

Benchmark U.S. 10-year Treasury yields extended gains on the Fed’s hawkish tone in its effort to tame soaring inflation. Meanwhile, the dollar index was close to its highest level since March 2020. The dollar was also headed for its seventh consecutive weekly gain.

Daily Swing Chart Technical Analysis

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

On the upside, resistance is a long-term Fibonacci level at $1958.70. Additional resistance is a short-term retracement zone at $1987.60 to $2009.90.

On the downside, support is a short-term 50% level at $1932.90, followed by a support cluster at $1908.10 to $1897.70.

Daily Swing Chart Technical Forecast

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

Bullish Scenario

A sustained move over $1932.90 will indicate the return of buyers. If this generates enough upside momentum then look for a late session surge into $1958.70. Overtaking this level will indicate the buying is getting stronger with $1987.60 the next target.

Bearish Scenario

A sustained move under $1932.90 will signal the presence of sellers. This could trigger a late session break into the main bottom at $1916.20, followed by the support cluster at $1908.10 – $1897.70.