Gold futures are trading lower shortly before the regular session opening on Thursday just one day after posting its best quarter in more than four years. After surging through the previous contract high made just last week, gold prices retreated to below the breakout level, suggesting that short-covering or buy stops drove the market higher, rather than new buyers.
At 11:41 GMT, August Comex gold is trading $1791.40, down $9.10 or -0.51%.
Underpinning gold in recent weeks has been the surge in new coronavirus infections around the world. This is causing investors to bet on more fiscal and monetary stimulus. Perhaps putting a lid on prices were better-than-expected economic readings out of the U.S. and China.
Later today at 14:00 GMT, investors will get the opportunity to react to the latest data on ISM U.S. Manufacturing PMI. Traders are looking for a reading of 49.6. Anything higher than 50.0 could trigger an acceleration to the downside.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. The uptrend was reaffirmed earlier today when buyers took out yesterday’s high. A trade through $1754.00 will change the main trend to down.
The minor trend is also up. A move through $1774.80 will change the minor trend to down. This will also shift momentum to the downside.
The minor range is $1754.00 to $1807.70. Its 50% level or pivot at $1780.90 is the first potential downside target.
The short-term range is $1671.70 to $1807.70. If the main trend changes to down then look for the selling to extend into its 50% level at $1739.70.
Daily Swing Chart Technical Forecast
The early price action suggests gold may be forming a short-term top. The first clue today was turning lower for the session after touching a multi-year high. The second clue was the break below the previous main top at $1796.10.
Given the early price action, the direction of August Comex gold the rest of the session on Wednesday is likely to be determined by trader reaction to yesterday’s close at $1800.50.
A sustained move over $1800.50 will indicate the presence of buyers. If this move creates enough upside momentum then look for another surge into $1807.70.
A sustained move under $1800.50 will signal the presence of sellers. The first downside target is the pivot at $1780.90. Since the main trend is up, look for buyers to show up on a test of this level.
If $1780.90 fails to hold then look for the selling to possibly extend into the minor bottom at $1774.80. A failure at this level will shift momentum to the downside.