Analyzing the movements of gold futures in different time charts, I anticipate that the technical formations are indicating a deep correction in gold prices could start soon as the gold futures set to end the week on a negative note, with worries about tensions in the Middle East and uncertainty over tariff and trade deals on the back burner for now.
Secondly, the weakening dollar, amid surging concerns about the Federal Reserve’s independence and expectations for early rate cuts, is extending bearish pressure on the US dollar. At the same time, the Asian shares hit their highest level in more than three years on Friday looks evident enough to support the gold bears at a point, while the gold futures are trading even below the important support at $3315.
Undoubtedly, Washington has reached an agreement with Beijing on how to expedite rare earth shipments to the United States could be the main reason for the upbeat mood in global stock markets that will trigger a selling spree in the yellow metal, which has already lost its safe haven potential due to its higher prices.
Moreover, U.S. Treasury Secretary Scott Bessent also said on Thursday that he has asked Republicans in Congress to scrap the Section 899 retaliatory tax proposal from their tax and spending bill after Washington reached an agreement with the Group of Seven industrialized countries.
I find that the shifting focus of the global markets over the past two sessions has been on the prospect of an early change of guard at the Fed since the Wall Street Journal reported that U.S. President Donald Trump has toyed with the idea of selecting and announcing Fed Chair Jerome Powell’s replacement by September or October this year.
I anticipate that such a scenario could extend bearish pressure over the gold futures as the dollar languished near a 3-1/2 year low on Friday and reached a 1.4% weekly loss, its largest decline in over a month while the U.S. Treasury yields were steady in Asia after falling the previous session, with the two-year yield at 3.7418% and the benchmark 10-year yield last at 4.2554% while the spot gold fell 0.23% to $3,320 an ounce.
On Friday, futures slipped to a near four-week low in Asian trade, indicating this fall to continue as a stable Israel-Iran ceasefire weakened safe-haven demand, while investors awaited the Fed’s preferred inflation gauge for clues on future interest rates while the investor focus shifted to the release of the Personal Consumption Expenditures price index for May, the Federal Reserve’s preferred measure of inflation.
Technical Levels to Watch
In the daily chart, gold futures have found a breakdown below the immediate support at 50 DMA at $3337 on Friday, and even trading below a significant support at $3313 indicating the quantum of bearish pressure that could push the gold futures to test the next significant support at the 100 DMA at $3177.
In the weekly chart, gold futures have been on a sliding spree constantly since last week after testing a recent high at $3476, which makes this slide steeper than ever before as the futures are sustaining below the important support at the 9 DMA at $3334.
Undoubtedly, this exhaustion will likely continue to test the next support at the 20 DMA at $3182 shortly.
In the monthly chart, gold futures have completed the formation of a bearish hammer this month that confirms a steep slide could continue during the next month to ensure the formation of a confirmatory candle.
Disclaimer: Readers are advised to take any position in gold futures at their own risk, as this analysis is based only on observations.