Upon analysis of the movements of the gold futures, I find that the gold futures certainly look under pressure amid assumptions for low-rate cuts, providing renewed strength to the US Dollar as higher interest rates make the greenback more attractive to increased returns on dollar-denominated assets.
Undoubtedly, the U.S. Dollar rose 0.1% on Tuesday and hovered near a two-year high it reached last week, capping the upside in gold prices.
On Tuesday, the quantum of indecisiveness was too high among the traders with a sudden surge in the dollar following the U.S. hawkish tilt amid growing assumptions over newly-elected U.S. President Donald Trump who might favor higher interest rates in 2025.
On the other hand, gold traders refrained from placing large bets ahead of a shortened week due to the Christmas holidays.
Undoubtedly, gold futures hit a one-month low on Wednesday as the Fed’s meeting indicated that the interest rates will remain higher for a longer period after Wednesday’s cut.
All these circumstances resulted in a surge in bearish pressure as the gold futures failed to fully recover and only have subdued moves as investors look busy assessing the implications of the Fed’s rate outlook, especially after joining the elected President Donald Trump on Jan. 20, 2025.
Technical Analysis: Levels to Watch
On the Daily Chart, gold futures, currently trading inside a bearish territory due to the formation of a ‘Bearish Crossover’ with a downward move by the 9 DMA below the 20 DMA, indicating a continuity of selling sprees till the joining of the elected President Donald Trump on Jan. 20, 2025.
Secondly, gold futures are trading below the 100 DMA at $2639, which is an immediate resistance that could push the gold futures to test the next significant support at 200 DMA at $2503 before Donald Trump resumes office.
Live Chart Analysis: Watch my upcoming video for an in-depth analysis on my YouTube channel ‘SS Analysis’ on Dec. 25, 2024.
Conclusion: Higher interest rates could continue to increase bearish pressure on gold as the cost of holding this non-yield asset surges in comparison of other valuable assets like high-yield bonds.
Disclaimer: Readers are requested to create any position in gold at their own risk as this analysis is purely based on observations and the author does not hold any position in gold.