June Gold’s Spiraling Trade Indicates Impending Volatility

Gold is edging higher on Wednesday after recovering from earlier weakness. Rising U.S. Treasury yields continued to cap gains, but a pullback by the U.S. Dollar from its intraday high is providing some support.

The dollar and Treasury yields jumped to multi-year highs on hawkish comments from U.S. Federal Reserve officials and as cautious traders braced for the U.S. central bank’s minutes from its latest meeting.

At 09:56 GMT, June Comex gold futures are trading $1933.40, up $5.90 or +0.31%. On Tuesday, the SPDR Gold Shares ETF (GLD) settled at $179.22, down $1.15 or -0.64%.

Treasury Yields, Dollar Controlling the Trade

U.S. Treasury yields are trading at multi-year highs, with longer-term yields moving more quickly and partly reversing some of the recent inversions of the U.S. curve.

Meanwhile, the dollar scaled its highest in nearly two years as Fed officials pushed for a quick reduction in the central bank’s bloated balance sheet, with one of them expressing openness to hefty rate increases of half a percentage point.

Looking ahead to later in the day, minutes from last month’s Fed meeting, due at 1800 GMT, may add detail to policymakers’ thinking about how quickly they could move to reduce bond holdings and lift interest rates. The Fed’s stance has been sounding ever more hawkish.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through $1893.20 will reaffirm the downtrend. A move through $1955.00 will change the main trend to up.

The minor trend is also down. A trade through $1948.90 will change the minor trend to up. This will shift the momentum.

The market continues to trade inside a pair of retracement zones at $1908.10 to $1958.70 and $1932.90 to $1897.70.

The short-term range is $2082.00 to $1893.20. If the main trend changes to down 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 the pivot at $1932.90.

Bullish Scenario

A sustained move over $1932.90 will indicate the presence of buyers. Taking out $1948.90 will change the minor trend to up. This could trigger a quick rally into the main top at $1955.00, followed closely by a Fibonacci level at $1958.70.

Overcoming $1958.70 will indicate the buying is getting stronger with the main top at $1972.50 the next target.

Bearish Scenario

A sustained move under $1932.90 will signal the presence of sellers. If this creates enough downside momentum then look for a drive into $1908.10 to $1897.70. This is the last potential support before the two main bottoms at $1893.20 and $1882.00. The latter is the trigger point for an acceleration to the downside.