Futures movements since January 19, 2023 indicate a trend reversal as the yellow metal continues to struggle below $1937.40 to find a break above the important resistance at $1950.
On Friday, despite the lining up, gold futures found exhaustion that had already been present since last Wednesday, as gold futures couldn’t find a break above $1950. .
Undoubtedly, traders were expecting a break above this significant resistance until the PCE numbers were released on Friday.
Now the focus is on the next , on February 1, as the Federal Reserve may announce a slight hike.
From a technical perspective, on the daily chart, if gold futures begin next week with a gap-down open below immediate support at 9 DMA and find a break below that support at $1926, the bears could head towards the next target at 26 DMA, which is at $1904.
In this case, the bears could turn more aggressive if gold futures break below $1904, as the pace of rate hikes could remain faster than expected.
There is no doubt that Friday’s Consumer Price Index figures raised renewed concerns over inflation, which weighed on risky assets as the Consumer Price Index hit 6 .5% in December 2022.
I conclude that weakness could deepen if gold futures fail to hold second support at $1904, a steep drop could continue in gold prices during the month of February.
On the other hand, any rally in gold futures above $1936 will be an opportunity to go short with a stop loss at $1950.
Warning : the author of this analysis may or may not have a position in gold futures at the time of publication. Readers may take any long or short position at their own risk.