Rangebound Gold Set Up for Major Breakout, but Which Way?

Gold futures edged higher on Thursday as concerns over rising costs bolstered the precious metal’s appeal as an inflation hedge, but the U.S. Federal Reserve’s aggressive policy stance limited gains.

At 20:47 GMT, June Comex gold is trading $1933.90, up $10.80 or +0.56%. The SPDR Gold Shares ETF (GLD) settled at $180.35, up $0.69 or +0.38%.

Gold buyers continue to express concerns over rising inflation, which shows no signs of letting up, however, they have been tentative for weeks or since the Fed raised rates in March.

The fact that gold prices have been holding steady could be a sign that bullish traders have started to absorb the possibility of an aggressive Federal Reserve. However, they seem to be unwilling to let up as long as inflation remains high.

Even the Fed sounded worried in its minutes released Wednesday afternoon. The minutes showed deepening concern among policymakers that inflation had broadened through the economy, with “many” participants prepared to raise interest rates in hefty 50-basis point increments in the next few meetings.

Despite the Fed’s hawkish tone, gold bulls are likely to continue to hang around until inflation starts to decline with conviction.

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 also shift momentum to the upside. The new minor bottom is $1916.20.

Daily Swing Chart Technical Forecast

Once again, the price action in June Comex gold was controlled by the 50% level at $1932.90.

Look for an upside bias to develop on a sustained move over $1932.90. The bigger targets include the main top at $1955.00, a long-term Fibonacci level at $1958.70 and another main top at $1972.50.

The downside bias will resume on a sustained move under $1932.90. The bigger targets include a long-term 50% level at $1908.10, a main trend Fibonacci level at $1897.70 and a pair of main bottoms at $1893.20 and $1882.00.