Gold Price Futures (GC) Technical Analysis – Trading on Weakside of Major Fibonacci Level at $1844.00

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Gold futures are trading lower on Wednesday, pressured by firm U.S. Treasury yields and a stronger U.S. Dollar. After a promising start to the week on Monday the market appears to be poised to resume its short-term and long-term downtrends.

Fundamentally, gold is being underpinned by worries about inflation. However, the fear of higher interest rates is working to keep the major buyers on the sidelines.

At 12:07 GMT, August Comex gold is trading $1815.40, down $10.00 or -0.55%. On Tuesday, the SPDR Gold Shares ETF (GLD) settled at $169.38, down $1.02 or -0.60%.

US Dollar Bounces Back

The U.S. Dollar is rebounding on Wednesday, a day after its biggest daily loss in more than two months, as U.S. Federal Reserve chief Jerome Powell struck a more hawkish tone as the central bank battles to rein in surging inflation.

Powell pledged that the U.S. central bank would ratchet up interest rates as high as needed, including taking rates above neutral, to kill a surge in inflation that he threatened the foundation of the economy, Reuters reported.

Investors Bailing Out of Popular ETF

In other news, investor flows into SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, continued to decline, reflecting a bearish sentiment in the market.

Fed’s Commitment to Higher Rates Puts Traders in “Sell the Rally” Mode

Gold is losing its appeal as an investment because investors can get a much higher yield in Treasurys. With the Fed’s commitment to control inflation through tighter monetary policies, the benchmark 10-year Treasury note is hovering about 3%. Another surge through this level could trigger a new leg down in gold prices.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. However, momentum may be getting ready to shift higher with the formation of the closing price reversal bottom on May 16.

A trade through $1792.00 will negate the closing price reversal bottom and signal a resumption of the downtrend. A move through $1917.60 will change the main trend to up.

The minor trend is also down. A trade through $1840.90 will change the minor trend to up. This will confirm the shift in momentum.

The minor range is $1792.00 to $1840.90. Gold is currently trading on the weak side of its pivot at $1816.50, making it resistance.

The main resistance is the long-term retracement zone at $1844.00 to $1890.00.

Daily Swing Chart Technical Forecast

Trader reaction to the pivot at $1816.50 is likely to control the direction of the August Comex gold futures contract on Wednesday.

Bearish Scenario

A sustained move under $1816.50 will indicate the presence of sellers. If this move attract more seller then look for a drive into the minor bottom at $1792.00, followed by the January 28 main bottom at $1787.80. The latter is the trigger point for an acceleration into the January 7 bottom at $1764.10.

Bullish Scenario

A sustained move over $1816.50 will signal the presence of buyers. If this generates enough upside momentum then look for a surge into the minor top at $1840.90, followed closely by the Fibonacci level at $1844.00.

The short-covering rally will get stronger if buyers can take out $1844.00 with conviction.

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This article was originally posted on FX Empire