June Comex Gold Forming Potentially Bullish Closing Price Reversal Bottom

Gold futures are trading higher late in the session on Thursday after rebounding from a test of its lowest level since February 16. The move has put the market in a position to post a potentially bullish closing price reversal bottom.

The price action is likely being fueled by short-covering and profit-taking since U.S. Treasury yields are moving higher and the U.S. Dollar is firm. Higher yields tend to weigh on gold because they increase the opportunity cost of holding the non-yielding asset. Additionally, a stronger U.S. Dollar tends to drive down demand from foreign buyers.

At 19:12 GMT, June Comex gold futures are trading $1895.90, up $7.20 or +0.38%. The SPDR Gold Shares ETF (GLD) is at $176.76, up $0.78 or +0.44%.

US Economy Contracts

It’s a stretch at this time, but the news of a U.S. economy contraction in the first quarter may have encouraged a few of the shorts to lighten up on the downside.

The U.S. economy unexpectedly contracted in the first quarter amid a resurgence in COVID-19 cases and drop in pandemic relief money from the government, but the decline in output is misleading as domestic demand remained strong.

Gross domestic product fell at a 1.4% annualized rate last quarter, the government said in its advance GDP estimate. Economists polled by Reuters had forecast GDP growth rising at a 1.1% rate.

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through $1870.90 will signal a resumption of the downtrend. A move through $2003.00 will change the main trend to up.

The closest resistance is a Fibonacci level at $1897.70, followed by a long-term 50% level at $1908.10.

The next resistance is a retracement zone at $1932.90 to $1958.70.

Daily Swing Chart Technical Forecast

The direction of the June Comex gold futures contract into the close on Thursday is likely to be determined by trader reaction to $1888.70.

Bullish Scenario

A sustained move over $1888.70 will indicate the presence of buyers. This could lead to a quick test of $1897.70, followed by $1908.10.

Overtaking the 50% level at $1908.10 will indicate the counter-trend buying is getting stronger. This could trigger an acceleration into a 50% level at $1932.90 and the long-term Fibonacci level at $1958.70.

Bearish Scenario

A sustained move under $1888.70 will signal the presence of sellers. This could drive the market back to the intraday low at $1870.90. This level is a potential trigger point for an acceleration to the downside with $1824.40 the next major downside target.