Gold futures are trading higher on Monday, shortly before the release of the major U.S. Manufacturing PMI report. This report should set the tone for the day. Traders are looking for a reading of 53.0.
This report is important because it affects multiple markets. A lower than expected number will indicate a slowing economy. This will also increase the chances of a Fed rate hike. Treasury yields could drop further on the news, weakening the U.S. Dollar. A weaker dollar should drive up demand for dollar-denominated gold. This could spike prices higher.
A stronger than expected report is likely to drive yields higher and encourage Treasury buyers to take profits after a prolonged rally. The dollar should strengthen on the news and gold prices could tumble on profit-taking.
At 13:33 GMT, August Comex gold futures are trading $1318.30, up $7.20 or +0.56%.
Daily Technical Analysis
The main trend is up according to the daily swing chart. Taking out the swing top at $1320.70 earlier today reaffirmed the uptrend. The next target is the March 25 main top at $1335.70.
The main trend changes to down on a trade through $1274.60. This is highly unlikely, however. Today is the eighth day up from the last swing bottom so we could see a closing price reversal top.
The major long-term retracement zone is $1307.70 to $1332.60. The market is currently testing this zone.
The main range is $1335.70 to $1274.60. Its retracement zone is $1304.50 to $1311.80. This zone is straddling the major 50% level at $1307.70.
Daily Technical Forecast
Today’s wide range means heightened volatility. The early rally was stopped by a downtrending Gann angle at $1323.70. Taking out this angle could spike prices into the major Fibonacci level at $1332.60, followed by the main top at $1335.70.
If the market weakens then look for a move into the main Fibonacci level at $1311.80, followed by a downtrending Gann angle at 1311.70. A trade through this angle will indicate weakness, but buyers could still come in on a test of the support cluster at $1307.70 to $1306.60. Additional support is $1304.50. If this price level fails then look for the selling to accelerate to the downside with the next target angle coming in at 1290.60.
Basically, a weaker than expected PMI number could drive prices through $1323.70 with targets at $1332.60 to $1335.70. Prices will break sharply but into potential support if the report is bearish for gold.
This article was originally posted on FX Empire