Gold futures are inching higher but in a tight trading range on Thursday as traders await the release of the latest report on U.S. Weekly Initial Claims. The price action suggests investor indecision and impending volatility.
At 10:00 GMT, April Comex gold is trading at $1894.70, up $4.00 or +0.21%. On Wednesday, the SPDR Gold Shares ETF (GLD) settled at $174.43, up $0.45 or +0.26%. Perhaps creating the indecision is the uncertainty over U.S. interest rates. On Tuesday, Fed Chair Jerome Powell helped put in a floor by reiterating last week’s remarks on “disinflation.”
However, any gains from those comments were offset by hawkish comments from New York Fed President John Williams, who said on Wednesday that moving the federal funds rate to 5.00% – 5.25% “seems a very reasonable view of what we’ll need to do this year to get the supply and demand imbalances down.”
Currently, market pricing anticipates the Fed funds rate peaking just above 5.1% by July and then falling by the end of the year to 4.8%. This is enough to drive up Treasury yields and the U.S. Dollar.
Since gold doesn’t pay interest, higher interest rates tend to weigh on demand for bullion. The stronger greenback also makes dollar-denominated gold more expensive to foreign investors. The main trend is down according to the daily swing chart. A trade through $1873.20 will reaffirm the downtrend and a move through $1975.20 will change the main trend to up.
The longer-term range is $2039.00 to $1647.70. Gold buyers are trying to establish a support base inside its retracement zone at $1843.40 to $1889.50. Additional support is a 50% level at $1862.40. This week’s low at $1873.20 is inside the long-term retracement zone. On the upside, a pair of 50% levels at $1909.30 and $1924.20 is potential resistance levels.
Trader reaction to the long-term Fibonacci level at $1889.50 is likely to determine the direction of the April Comex gold futures contract on Thursday.
A sustained move over $1889.50 will indicate the presence of buyers. If this move creates enough upside momentum then look for a possible surge into $1909.30 – $1924.20. Since the main trend is down, look for sellers on the first test of this area.
A sustained move under $1889.50 will signal the presence of sellers. This could trigger a break into the main bottom at $1873.20, followed by a short-term 50% level at $1862.40.