Gold: Bears Could Turn Aggressive Amid Increasing Choppiness
2024.01.05 12:50
After examining the movement of on the daily chart, a notable prevalence of significant bearish activity becomes apparent. This trend is triggered by a sharp decline in gold futures during the last trading session of the week. This is despite a reversal following the announcement of nonfarm payrolls, which could potentially influence the Federal Reserve policymakers’ approach in the near term.
This development has resulted in weakness of the , which witnessed a choppy session today, indicating a sudden increase in the probability of a reversal in Dollar Index futures. This could push the yellow metal downward before the weekly closing as the reversal looks like only a knee-jerk reaction due to a short-covering rally from the day’s low at $2031.15.
Dollar Index Futures Daily Chart
Though gold is trying to hold above the immediate support at 18 DMA, which is at 2051.60, this could only be a futile attempt by gold bulls as bears could very likely maintain control until the Fed’s meet on Jan.31-Feb.1. The uncertainty has to do with the job report and whether it provides convincing grounds for the Federal Reserve to refrain from implementing a rate cut.
Gold futures could try to retest the next resistance at 9 DMA, which is at $2066.61. Such a move could potentially trigger another round of selling before the conclusion of this week.
On the other hand, if gold closes this week below the day’s low, a gap-down opening could be likely on the first trading session of the coming week as the choppiness is likely to continue.
Finally, I conclude that any upward move to $2072.52 will provide an opportunity to short gold. In such a scenario, a steep slide, as seen in Sept. 2023, may happen again.
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Disclaimer: The author of this analysis may or may not have any position in the Gold futures. Readers can take any long or short trading position at their own risk.
