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Gold: Bears Look Aggressive Before Fed Speaks

Published 29/01/2023, 03:18
Updated 09/07/2023, 11:31

Movements in the Gold futures contracts since Jan. 19, 2023, indicate a reversal as the gold futures continue to struggle below $1937.40 to find a breakout above the significant resistance at $1950.

On Friday, despite the PCE index coming in line, gold futures found exhaustion which was already there since last Wednesday, as the gold futures could not find a breakout above $1950.

Undoubtedly, the traders were expecting a breakout above this significant resistance till the PCE numbers came on Friday.

Now, the focus has tilted towards the next rate decision on Feb. 1 as the experts believe that the Federal Reserve could announce a small hike.

Gold Futures Daily Chart

Technically speaking, in a daily chart, if the gold futures start the upcoming week with a gap-down opening below the immediate support at 9 DMA and find a breakdown below this support at $1926, bears could head towards the next target at 26 DMA, which is at $1904.

In that case, bears could turn more aggressive if the gold futures find a breakdown below $1904 as the pace of rate hikes could remain quicker than expected.

Undoubtedly, Friday’s PCE numbers raised new concerns about inflation that weighed on the risky assets as the Consumer Price Index rose to 6.5% in Dec. 2022.

I conclude that the weakness could surge if the gold futures do not hold the second support at $1904, a steep slide could continue in gold prices during February.

On the other hand, any rally in gold futures above $1936 will provide an opportunity to go short with a stop loss at $1950.

Disclaimer: The author of this analysis may or may not have any position in the Gold futures at the time of publication. Readers can take any long or short trading position at their own risk.

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