Gold prices posted a modest recovery after falling about 2.3% from $1,300 to about $1,270 per ounce, which helped boost pure-play funds like the SPDR Gold Trust ETF (GLD) and hurt short funds like the Direxion Daily Junior Gold Miners 3X Bear Shares (JDST).

The volatility in gold prices stems from the upcoming Federal Reserve Open Market Committee (FOMC) meeting on Wednesday, June 14 at 2:00 pm EST. At the meeting, the central bank is widely expected to hike interest rates to a range of 100 to 125 basis points. The decision could help bolster the U.S. dollar and hurt gold prices, while Chairwoman Janet Yellen's comments at the news conference could produce ongoing volatility by shifting the perception of future hikes. (For more, see: The Effect of Fed Fund Rate Hikes on Gold.)

The market will also be keeping an eye on Bank of Japan and Bank of England meetings occurring this week for similar signs of strengthening currencies.

Chart showing the year-to-date performance of the SPDR Gold Shares (GLD)

From a technical standpoint, the SPDR Gold Shares Trust remains in the middle of its price channel dating back to February of this year. The price rebounded from the 50-day moving average at $119.91, but a bearish moving average convergence divergence (MACD) crossover suggests that it may not be out of the woods yet. Moreover, the relative strength index (RSI) provides few clues as to future price movements given its neutral 51.69 reading. (See also: GLD: iShares Gold Trust ETF.)

Traders should watch for a continuing rebound to re-test trendline resistance at around $123.00 or a breakdown below the 50-day moving average to lower trendline support near S1 support at $117.04.  At the same time, traders should keep an eye on leveraged ETFs in the sector as a potential opportunity to capitalize on volatility, including the Direxion Daily Junior Gold Miners 3X Bear Shares and similar funds. (For additional reading, check out: Top 5 Gold ETFs for 2017.)

Charts courtesy of The author holds no position in the stock(s) mentioned except in passively managed index funds.

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