Gold Technical Analysis for June 16, 2016
Technical Analysis – Gold markets went back and forth during the course of the day on Wednesday, testing the $1280 level for support. We did find it there and one would have expected, so looks like we still have plenty of buyers below. At this point in time, I believe that the market is simply trying to build up enough momentum to break out to the upside and finally clear the $1300 resistance barrier above. Selling isn’t even a thought at this point, as we have seen so much in the way of bullish momentum previously.
In Other view – Global risk aversion boosts Gold to a fresh 2016 highs
Extending its bullish trajectory for seventh consecutive day, Gold on Thursday jumped back above $1300 level for the first time since early May. The bullion continued rising to hit a fresh 2016 high and is currently trading at the highest level since Jan. 2015.
The ongoing bullish momentum got an additional boost after the Bank of Japan also left its monetary policy unchanged. Both the central banks opted to wait until the results of the upcoming UK-EU referendum on June 23 that could shake global financial markets.
Moreover, a fresh bout of global risk-aversion on Thursday, dragging equity markets across the world lower, and a broadly weak greenback is also seen supporting the safe-haven appeal of the yellow metal.
On Wednesday, the precious metal rose after the US Federal Reserve lowered its forecast for Fed fund rates and 2016 GDP forecast, suggesting a slower pace of monetary policy tightening in future years.
Going forward, the bullion traders will now take cues from a slew of important economic releases / events from major developed economies.
Technical levels to watch
The momentum seems strong enough to boost the metal towards Jan. 2015 highs resistance near $1307, above which it seems to continue to scale new heights and head towards Aug. 2014 highs resistance near $1319-20 area.
On the downside, $1300 handle now becomes immediate support. Any dip below this immediate support is likely to get bought into and hence is likely to limit any further weakness below $1292-90 support.
In Other Point – Gold Futures
Comex Gold Futures (GC) Technical Analysis
August Comex Gold futures surged to the upside after taking out the May 2 main top at $1308.00 and the $1308.20 contract high from January 22, 2015. The rally was fueled by the U.S. Federal Reserve’s monetary policy statement and comments from Fed Chair Janet Yellen that indicated it could be less aggressive in tightening monetary policy next year.
The Fed left interest rates unchanged on Wednesday and the policy statement suggested that a rate hike in July is also likely off the table. It did signal, however, that it still planned to raise rates twice in 2016, though it said slower economic growth would crimp the pace of monetary policy tightening in future years.
Gold buyers also stepped up activity when Asian stocks turned lower on Thursday, while the dollar slid to a 21-month low against the Japanese Yen after the Bank of Japan refrained from taking further stimulus steps, hours after the Fed’s review.
Activity in the physical market also continued to support higher prices. Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.23 percent to 900.75 tonnes on Wednesday, the highest since October 2013.
Technically, the main trend is up according to the daily swing chart. The trend turned up when $1308.00 was taken out. Today is the twelfth day up from the last swing bottom at $1201.50 so the market is in the window of time for a potentially bearish closing price reversal top, but this is only likely to happen if there is a major news event that fuels a massive turnaround by the U.S. Dollar, an intervention by the BOJ, for example.
Based on the current price at $1312.30, the nearest support is the former contract high at $1308.20 and a steep uptrending angle at $1297.50.
A break back under $1308.20 will be the first sign of weakness. However, taking out the steep angle will indicate a major shift in momentum and investor sentiment.
A sustained move under $1297.50 could trigger an acceleration to the downside with the next major target angle coming in at $1249.50.
A sustained mover over $1308.20 will signal that the buying is getting stronger. This could generate enough upside momentum to challenge the August 12, 2014 top at $1321.50. This is a very important level because it is the trigger point for the start of a huge rally with the next target the July 10, 2014 main top at $1346.80.
Watch the price action and read the order flow at $1308.20 today. Trader reaction to this level will determine the direction of the market all day. This rally is being driven by external factors so the volatility may be greater than average.