Despite surging optimism over potential positive developments in potential U.S.-China trade talks, gold futures lost gains last Friday, forming an exhaustive candle that indicates a limited upside for the gold futures.
Monday, despite a bullish opening by the gold futures due to surging weakness in the US Dollar, looks unstable as investors look cautious before the Federal Reserve’s interest rate decision this week.
However, the immediate appeal of safe-haven assets like gold seems to be reducing amid surging hopes of dialogue over the trade tensions between the world’s two largest economies.
Undoubtedly, the Fed is expected to keep interest rates unchanged as the policymakers have adopted a cautious stance to assess the impact of Trump’s tariffs on inflation, while President Trump continues to pressure the central bank to lower interest rates.
Such a scenario indicates that if the Federal Reserve keeps the interest rate unchanged, gold futures could continue to slide more as the higher rates typically weigh on gold, as they increase the opportunity cost of holding the non-yielding assets while the weaker US Dollar makes the gold cheaper for foreign buyers as the yellow metal is currently available at much higher prices.
I anticipate that the gold futures could remain muted before the Fed’s decision and could turn extremely volatile after that, as this final outcome will indicate the quantum of the pressure exerted on the Fed.
Technical Levels to Watch
In the daily chart, gold futures are currently teetering at a pivotal point, just below the immediate resistance at 9 Days Moving Average (DMA) at $3296 and holding just at the immediate support at 20 DMA indicating surging bearish pressure as the majority of investors are full of suspicion amid growing uncertainty over the Trump’s further moves.
I anticipate that if the gold futures find a breakdown below the immediate support at 20 DMA at $3255 could test the next support at $3202 in today’s session but a sustainable move by the gold futures below this level could push the futures to hit the next significant support at 50 DMA at $3104 this week as this move could generate a new bearish crossover with tilting 9 DMA that will come below the 20 DMA.
Inversely, if the gold futures find a sustainable move above the 9 DMA, amid growing uncertainty over geopolitical moves, it could provide a good opportunity to load fresh shorts above $3354 with a stop loss at $3395.
Disclaimer: Readers are advised to take any position in gold futures at their own risk, as this analysis is only based on observations.