Gold: Will Bears Wait for the Fed’s Final Verdict?
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Gold bears appear poised to become more aggressive as concerns about a looming recession diminish, fueled by favorable economic data that supports expectations of a potential rate cut.
Today’s bumpy movements in price appear to be nothing more than a dead cat bounce. But the weekly closing level will play an important role in defining further directional moves. With U.S. inflation at 0.3% in December 2023, and the YoY rate at 3.4%, the Federal Reserve will be on the lookout for signs of easing before rolling out any interest rate cuts this year.
US Dollar Index Futures Daily Chart
The US Dollar Index saw a sharp reversal soon after the announcement of core CPI (YoY) for December and initial jobless claims, resulting in a reversal of strength in US Dollar Index Futures and exhaustion in gold futures.
The impact of this data announcement is clearly visible in the formation of an exhaustion candle in the daily chart within a few minutes, while gold tested the day’s high at $2044.15 and hit the day’s low at $2029.55.
Gold Futures Daily Chart
In the daily chart, gold is showing weakness since the formation of a bearish crossover with a downward move by the 9 DMA below the 18 DMA on January 9. This resulted in the formation of a bearish candle on January 10 and an exhaustion candle on January 11 after the conversion of a daily bullish candle into an ‘exhaustion hammer’.
Gold Futures Weekly Chart
In the weekly chart, gold is trying to hold the immediate support at 9 DMA, which is at $2035, despite a downward move to $2029.55.
Gold witnessed a bearish hammer during the last week of December 2023, followed by the formation of two consecutive bearish candles during the first two weeks of January, confirming the continuity of the selling spree on every upward move. This can be expected to continue for the rest of this month.
Finally, I conclude that uncertainty will continue to loom amid a bearish news flow until the final statements emerge from the upcoming Federal Reserve meeting scheduled for January 31 to February 1. The yellow metal is likely to slide amid decreasing recessionary fear and the difficulty in accurately predicting the direction and speed of rate cuts, as the Fed aims to manage inflationary pressures.
Watch my attached video, which I uploaded on December 17, 2023.
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