Gold Bulls Consolidating Before Making Run at Record High
Comex gold futures are slightly higher on Wednesday, while hovering slightly below yesterday’s multi-month high. The early price action suggests that investors could reduce their long positions in reaction to higher Treasury yields and a slight increase in demand for risky assets. Investors could also tread carefully as the market nears its all-time high.
As of 08:00 GMT, April Comex gold futures are trading at $2052.10, up $8.80 or +0.43%. On Tuesday, the SPDR Gold Shares ETF (GLD) settled at $191.47, up $5.06 or +2.71%.
Some traders consider the market to be overbought based on an oscillator or indicator, but the current rally is not fueled by an oscillator or indicator, it’s fueled by headlines and a war in Ukraine. Inflationary risk concerns are also supporting the market.
The market should continue to rise if the situation in Ukraine worsens or if inflation gets out of control. Gains could be limited by the Fed’s planned rate hike next week, but traders have known that for weeks. Nevertheless, the bullish fundamentals are much stronger than the “so-called” overbought oscillators and indicators, so any pullback in price is likely to attract new buyers.
Daily Swing Chart Technical Analysis
The main trend is up according to the daily swing chart. A trade down to $2078.80 will signal a resumption of the uptrend. A move to $1821.10 will alter the main downtrend.
Today’s first inside move suggests investor indecision and impending volatility.
The minor trend is also up. A trade down to $1878.60 will change the minor downtrend. This will also shift the momentum down.
The main range is $2117.10 to $1682.40. The market is currently trading on the strong side of its retracement zone at $1951.00 to $1899.80, making the zone a major support.
The main upside target is the all-time high from August 6, 2020 at $2117.10. Breaking out of this level could trigger an upward acceleration.
The last time the market was at this level was almost five months after the start of the coronavirus pandemic. The fundamentals were different back then. Central banks were flooding their respective economies with massive amounts of liquidity.
This time the rally is fueled by historically high inflation and safe haven buying due to the war. However, central banks are now considering measures to control the massive amounts of liquidity.
The inflow of liquidity and the reduction in liquidity somewhat offset each other, indicating that high inflation and safe-haven buying are the real drivers of the current recovery.
Expect the bullish tone to continue as long as $1951.00-$1899.80 holds as support.