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Gold Price Futures (GC) Technical Analysis – Trend Turns Down Amid Rising Treasury Yields

Gold futures fell sharply on Wednesday as risk sentiment continued to improve on hopes of a faster recovery from a coronavirus-driven economic slump, with investors shrugging off the civil unrest in the United States.

The market is under pressure because the strong global equity markets are forcing investors to rethink their long hedge positions in gold. So as stocks rise, investors peel off some of their gold holdings.

The short-term gold bull could get punished severely on this current move especially if all three major U.S. stock indexes reach or exceed their all-time highs.

Investors are shedding all so-called “safe-haven” assets including Treasurys, the Dollar and Gold. Rising Treasury yields can be especially punishing for gold investors because gold doesn’t pay you anything to hold it.

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Those who bought gold because of the civil unrest headlines pushed by the news services and some analysts could have their heads handed to them because they forgot the major rule – interest rates control the direction of gold, not some thug looting a store on Michigan Avenue in Chicago.

On Wednesday, August Comex gold settled at $1704.80, down $29.20 or +1.68%.

Daily August Comex Gold
Daily August Comex Gold

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. The trend turned down on Wednesday when sellers took out the last swing bottom at $1701.60. The trend will turn up when buyers take out the previous main top at $1761.00.

The short-term range is $1789.00 to $1668.40. Its 50% level at $1728.70 is potential resistance.

The main range is $1454.80 to $1789.00. Its retracement zone at $1621.90 to $1582.40 is the primary downside target. To longer-term traders, this zone may represent value so I wouldn’t be surprised if buyers showed up on a test of this area.

Short-Term Outlook

Now that the trend has turned down, the momentum may start to increase to the downside. However, I will understand if sellers get nervous because of what happened at $1683.03 and $1668.40. The key to success for the short-sellers will be having enough selling volume behind them to take out $1668.40.

The main bottom at $1668.40 could be the trigger point for a steep acceleration to the downside with the next major target $1621.90 to $1582.40.

August gold futures haven’t made a new high for the year since April 14. This tells me that investors are not willing to chase the market higher at this time. Their only alternative is to play for value, which is why I think bullish traders are going to allow this market to pullback into at least $1621.90 to $1582.40.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

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