Gold Poised for Breather Until Fed's Next Meeting
Satendra Singh | May 04, 2023 11:22PM ET
The movements of gold futures since April 19, 2023, suggest that a breather may be imminent, as gold prices appear poised for a reversal. Gold futures failed to break out above the previous high of $2078, tested on March 8, 2022, and then experienced a steep decline for the next six trading sessions, ultimately reaching $1896.
In the daily chart, gold futures may repeat these movements if they are unable to maintain immediate support at $2006 by the end of this week.
However, a short-covering rally could occur as gold bugs become increasingly indecisive following the Fed’s recent outcome. If the gold futures are unable to sustain above the immediate resistance at $2064 on May 5, 2023, exhaustion will become apparent.
On the weekly chart, gold futures have formed a double top that is likely to attract big bears looking to short any rally in gold futures.
Gold futures are currently above the formation of a bullish crossover in the weekly chart but could experience sell-offs if they fail to hold above the 9 DMA at $1981.
A reversal is expected from the 18 DMA in the weekly chart, located at $1928, and a breakdown below this significant support could favor the bears.
Get The News You Want
In the monthly chart, gold futures have formed a bullish monthly candle , which casts doubt over the sustainability of a monthly candle formed within only four trading sessions of this month.
The Fed’s recent final verdict, announced on May 3, 2023, has raised concerns about this exaggerated move by gold futures during the first three sessions and may trigger a selling spree during this month.
This week’s closing and the upcoming week's opening levels are crucial for gold futures, as uncertainty has surged since Mr. Powell himself said that a 5% Fed Funds rate plus ongoing QT are an undoubtedly restrictive policy tool.
Coupled with banking stress and tighter credit conditions, this could create quite the cocktail.
Disclaimer: The author of this analysis may or may not have any position in the Gold futures. Readers can take any long or short trading position at their own risk.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.