(Kitco News) - Mon June 3 – August Comex gold futures edged modestly higher in pre-New York action Monday, amid weakness in the U.S. dollar index. Gold prices remain within recent ranges, but are continuing to build a minor base and bottom on the daily chart. For now, the yellow metal has found a short-term equilibrium point and price action has largely stabilized.
This week gold traders will be eyeing the U.S. employment data due for release on Friday. Any signs of a strengthening U.S. economy could support views that the U.S. Federal Reserve could begin tapering monetary policy sooner rather than later. Overall, trade could be limited to fairly narrow ranges over the next several days as traders await that key data.
Over the next few days, gold action could be limited between minor upside resistance from the May 31 peak at $1421.60, and minor near term supports at $1,384.20 and then $1,372.80. Gains above the $1,421.60 zone would be a positive signal and could allow the gold market to probe even higher toward 40-day moving average resistance at $1,435.50.
Looking at the bigger picture, technically, on the daily chart, gold prices are continuing to consolidate and build a minor base pattern off the April 16 low at $1,323 per ounce.
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A “higher low” is seen on the daily chart at the May 20 low at $1,338 per ounce. See Figure 1. The $1,338 zone is very important technical chart support for traders to monitor near term. It will likely be out of reach throughout the early part of this week as the market waits for U.S. jobs news. It would take a bearish shock to the gold market to force a retest of that low. However, given the current brewing mix of outside market factors that support zone should be out of reach near term.
Nonetheless, if the gold market were to break support at $1,338 it would be a bearish signal and would set the market up for a quick retest of $1,323. But, outside markets will be important to watch near term, including action in U.S. equities and the U.S. dollar. U.S. stocks are vulnerable to continuing short-term corrective weakness.
If renewed weakness in stocks emerges and continuing softness in the U.S. dollar unfolds, that will give gold bulls the edge in the days ahead. Major upside resistance and a target for gold bulls lies at the May 3 daily high at $1,488.50. If a rally through that ceiling were to occur, it would be a strong bullish signal and would target the $1,500 level.
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