Gold futures took a dramatic turn this Wednesday, defying expectations by hitting a month-long low before rallying sharply. This reversal played out just as the Federal Reserve announced a rate cut, while signaling a cautious approach to future rate reductions.
After the Fed's policy meeting, gold futures tumbled 2% overnight. The central bank's decision to hint at fewer rate cuts in 2025, amid persistent inflation concerns, rattled investors.
Technical Analysis: Key Levels to Watch
On the daily chart, gold futures show a bearish trend despite Wednesday’s uptick, dipping below the crucial 100-day Moving Average. The recent formation of an exhaustive candle indicates strong selling pressure, fueling further bearish sentiment.
Gold futures are currently struggling to overcome resistance at the 100 DMA, set at $2,634. A breakdown below the uptrend channel today could trigger a significant selling spree. However, any upward movement might provide an opportunity to establish short positions just beneath the secondary resistance at the 20 DMA, now at $2,674.
On the 4-hour chart, the outlook appears even more concerning. A bearish crossover has formed as the 20 DMA and 9 DMA have fallen below the 200 DMA. With gold futures trading under the 9 DMA at $2,641, bearish momentum may intensify into Thursday and Friday.
In conclusion, gold futures might continue their descent into Friday, given their position below the 100 DMA. The bearish trend seems ready to drive prices toward the next major support at the 200 DMA, currently at $2,497.
Disclaimer: This analysis is based on observations and should not be taken as investment advice. Readers should assess any potential positions in gold futures independently.