Technical Encouragement

The daily chart shows that the May pullback found support around the 38.2% retracement level from the November 2024 low. This suggests good news for those expecting gold prices to keep rising. Although the highs in May and June haven’t been broken, buyers are still in control. They are keeping the upward trend in gold prices alive. Currently, buyers are holding their ground as gold approaches previous highs. This trend supports the idea that momentum is favoring higher prices. The rise past $3,388 provides a stronger base for gold, supported by external factors that usually drive investors to gold. The 38.2% retracement level, which has held since November, is significant and closely watched by experts looking for signs of renewed demand.

Momentum Favors Higher Prices

Overall, traders are eager to see price dips as chances to buy. As tensions abroad grow, gold continues to attract investors during uncertain times. With the dollar weakening, it’s no wonder that bullish positions are being maintained. Powell’s recent comments suggested patience regarding interest rates, reinforcing the appeal of non-yielding assets. As a result, investors, particularly those with hedged portfolios, have been leaning more towards gold. Recent economic data has remained steady, allowing technical analysis to play a crucial role. We’re currently watching the price range between $3,403 (the intraday peak) and $3,500 (April high). If prices hold near $3,400, the chances of a higher bid increase. Previous attempts near the May high struggled, so intraday levels will be crucial for assessing near-term strength. From a derivatives standpoint, open interest in futures and options has been rising, signaling strong conviction. The May high of $3,437 is significant because it not only previously capped prices but also aligns with an acceleration point. If this level is decisively broken, implied volatility may spike, impacting short-term contracts first. This indicates that, barring any sudden shifts in macro news or policy changes, the momentum is leaning towards further increases. For day traders, it’s wise to observe the behavior of prices after the US market opens, especially around $3,403 and $3,437. If gold consistently closes above these levels, momentum-based strategies are likely to gain traction. Technicians will be focused on the trading volume during any move past these resistance points, as low-volume breakouts are viewed skeptically. However, this week, we’ve seen an increase in futures volume, alongside stronger spreads compared to other metals, providing some confirmation from the broader commodity market. Moreover, Skilling and Martin recently noted a shift in dealer positioning toward long gamma. If this trend continues, prices may become more volatile near resistance, leading to sharper price movements as dealers hedge. This environment requires more active risk management rather than passive exposure. If the dollar stabilizes above recent lows, gold could face temporary resistance. However, unless real yields rise significantly, interest in gold, especially among international investors seeking currency stability, is likely to remain robust. For now, the momentum supports those looking for higher prices, with secondary support around the $3,354 level, close to the 20-day average. Momentum-driven strategies will likely keep pushing positions until a major high is broken. This setup is visible across different time frames: shorter-dated options are firming up, while longer-dated contracts remain stable. This indicates that traders expect movement without chaos, creating an environment where directional bets can continue without the risk of sudden reversals, as long as setups are adhered to. It’s wise to stay tactical, rotating exposure based on range limits while using volume profiles and key levels as guides. Anchoring risk to visible technical levels allows for greater resilience if prices struggle to break through resistance. Market conditions still support a gradual increase in exposure, as long as alerts are set for any shifts through the $3,354–$3,340 zone. Moving below this range would change the outlook, but for now, this support level is holding firm. Create your live VT Markets account and start trading now.

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