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After reviewing the movements of the gold futures in a daily chart since the beginning of this week, I anticipate that the gold futures are testing key support levels on Friday after repeated attempts to sustain above the immediate resistance at $4105, currently trading below the key support at $4,030 where a sustainable move could push the futures to test the next support at the 50 EMA (3965), and a breakdown below this could trigger a panic selling as easing bets on a December interest rate cut by the Federal Reserve buoyed the dollar and weighed on commodity prices across the board.
Traders are pricing in a 28.5% chance that the Fed will cut rates by 25 basis points during its December 10-11 meeting, up from the 21.5% chance seen yesterday but down sharply from the 45.4% chance seen last week, according to CME Fedwatch.
A host of Fed officials are set to speak later on Friday, while upcoming purchasing managers index data for November is also set to provide more cues on the world’s largest economy.
This comes ahead of a barrage of key U.S. economic readings for September, due next week. The prints were delayed by a prolonged government shutdown, which ended in early November.
On the other hand, concerns over stretched fiscal spending in the developed world, especially Japan, also helped spur some haven demand. Japanese Prime Minister Sanae Takaichi’s administration approved a 21.3 trillion yen ($1335 billion) stimulus package on Friday, sparking increased questions over how the government will fund its rapidly increasing spending plans.
I find that the Longer-term Japanese bond yields soared to multi-decade highs this week, which could exert bearish pressure on gold futures and bitcoin this week.
Undoubtedly, Bitcoin (BTC/USD) has seen a sharp pull down of approximately 8.5% on Friday, and I find that the gold futures look ready to follow this slide too if it doesn’t hold the key support at the 50 EMA on Friday.
I find that if the gold futures sustain below this key support next support at the 100 EMA ($3780 could be tested soon.
Disclaimer: Readers are advised to take any position in gold at their own risk, as this analysis is based only on observations.