Gold: Bears Could Turn Aggressive Amid Increasing Choppiness
Satendra Singh | Jan 05, 2024 11:54
After examining the movement of gold futures 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 US Dollar, 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.
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.
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