Gold futures trade to new record high before correcting

As of 4:46 PM EDT, the most active June contract of gold futures is fixed at $2360.70 down $30.40, or -1.27%%. Gold futures also traded to its highest value of $2448.80 today, the highest value in history. 

The latest leg of this rally began on March 25 when gold futures opened at $2189.30. Including today there were only three trading days in which June gold closed below the previous close. What would follow would be a spectacular parabolic move taking June gold to today’s high of $2448.

Concurrently, the dollar has been exceedingly strong since Wednesday, April 10. The dollar index opened just above 104 on Wednesday and after factoring in today’s gains of 0.69% the dollar index is currently fixed at 106.075. Overall, the dollar has been moving higher since the low of 102.35 which occurred on Friday, March 11.

U.S. Treasury yields traded lower today, with the ten-year note down 10.2 basis points taking its current yield to 4.493%, and the two-year U.S. Treasury note falling by 9.7 basis points taking the yield to 4.877%. U.S. equities were also lower on the day.

Although gold futures declined today, there are still strong geopolitical concerns. Fears of Iran retaliating against an Israeli attack on its Syrian Embassy this month are at the forefront of these concerns. The attack on Iran’s embassy killed senior members of the country’s military. It was reported that the United States has issued a warning for travel to Israel, fearing an imminent large-scale attack on its country.

The most recent strong upside move in gold was based on three major factors. First, recent reports by the World Gold Council have revealed that central banks globally have been adding to their gold reserves. Secondly, the anticipated rate cuts that the Federal Reserve has announced would have a positive influence on gold. Lastly, geopolitical concerns about conflicts in the Middle East as well as the Russian–Ukraine conflict. 

These factors are still very much on the minds of market participants. This means that today’s selloff was a signal that gold prices had moved up too much too quickly, and likely predicated on profit-taking by shorter-term traders. 

That being said, the current resistance based on the 23.6% Fibonacci retracement is at $2385.80. Minor support is at $2346.50 the 38.2% Fibonacci retracement. With major support at $2314 based upon a 50% retracement from $2179.90 to today’s high of $2448.80.

Wishing you as always good trading,