June Comex Gold: Buyers face a wall of resistance from $1932.90
Gold futures jumped on Friday as investors took advantage of a weaker US dollar. However, the gains were likely capped by rising Treasury yields.
On a fundamental level, gold likely received some support from reports of a contraction in the US economy during the first quarter and high inflation.
On Friday, June Comex gold futures settled at $1911.70, up $20.40 or +1.08%. Additionally, the SPDR Gold Shares ETF (GLD) ended at $176.91, down $0.02 or -0.01%.
Bullish Traders Eye Possible Stagflation Scenario
U.S. gross domestic product (GDP) unexpectedly shrank at an annualized 1.4% in the first quarter, marking a sharp reversal for an economy that just posted its best performance since 1984, the Commerce Department.
The weak GDP report was followed on Friday by the government’s inflation data. Although the core PCE was lower than the forecast of 5.3%, including food and energy price volatility, the PCE index accelerated by 6.6%, the fastest pace since January 1982.
The real problem for the economy appeared in the employment cost index, a separate measure of inflation. It rose 1.4% in the first quarter from the prior period, according to the Bureau of Labor Statistics. The Dow Jones estimate for this level was 1.1%.
Fed On Tap
Gold traders are now focused on the U.S. central bank’s two-day policy meeting starting May 3, with officials expected to raise the target benchmark rate by half a percentage point.
Daily Swing Chart Technical Analysis
The main trend is down as per the daily swing chart, however, the trend is now up following the confirmation of Thursday’s closing price reversal low.
A trade down to $1870.90 will negate the closing price reversal low and signal a resumption of the downtrend. A move to $2003.00 will change the main uptrend.
Support is a long-term 50% level at $1908.10 and a short-term Fibonacci level at $1897.70.
On the upside, the closest resistance is a short-term 50% level at $1932.90, a long-term Fibonacci level at $1958.70 and a short-term retracement zone at $1976.50 at $2001.40.
Thursday’s daily closing price reversal bottom did not change the main uptrend, but it did signal a change in momentum. Moreover, breaking above the 50% long-term level at $1908.10 is also a sign of strength. Nonetheless, buyers still face an uphill battle with potential resistance levels lining up between $1932.90 and $2003.00.
While buyers can expect a tough rally, sellers have a much easier path to overcome. The daily chart indicates that a move through $1870.90 could trigger downward acceleration with potential targets at $1824.40, $1791.60 and $1783.80.