The action in the gold futures market (June 15) suggest that the metal will more than likely rise from here. During the session on Wednesday, we had the FOMC meeting minutes released, and they suggested that a June interest rate hike is very unlikely out of the Federal Reserve. This of course will build a bit of a case for owning gold, as the US dollar will more than likely struggle.
However, we didn’t necessarily think there was an imminent hike coming, and I think that the market in general was already looking at that possibility. It is because of this that we are looking for a gradual gain in the gold market, not some kind of “melt up.” The candle from the Wednesday session also makes a case for buying as far as we can see.
The gold forecast that we have prepared is based upon a grind higher, as there was a significant amount of bearish pressure that sank the value of this market to begin with. There will be areas above that are choppy, but if you have the ability to hang onto the trade, you should be rewarded.
The area just below is supportive, all the way down to the $1180 level. After all, this was a massively consolidative area, with a lot of choppiness and action in the region. I think that the market is simply trying to build up enough momentum to go higher, and that is exactly what this pullback is giving us – a chance to build up momentum. Also, the hammer for the session suggests that the sellers are starting to lose a bit of strength – meaning that the buyers should step in at this point and take control.
We see the $1230 level above being a bit of a hurdle, but ultimately we are looking for a move to the $1300 level given enough time. With summer trading coming up, it very well could be the end of the season before we get there, but it seems to be the logical move going forward as gold suddenly looks interesting again.