The Gold Bubble Looks Ready to Burst
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Gold
-0.16%
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On analyzing spot gold and gold futures in the daily chart since December 4, 2023, I find futures, after hitting a new peak at $2203, have entered the overbought territory amid mere expectations for lower interest rates this year.
Gold Futures Daily Chart
Gold Spot Daily Chart
Both spot gold and futures hit fresh heights on Friday after comments from U.S. Federal Reserve Chair Jerome Powell, who raised expectations for lower interest rates this year.
Observations
Gold looks ready to retreat, as mere expectations for lower interest rates can’t keep futures prices above $2192 nor spot prices above $2189 for a long.
Economic data, announced before Powell’s second appearance, looks quite supportive for equity markets and indicates limited upside for precious metals.
A steep slide awaits the yellow metal.
Shrinking the opportunity cost of holding non-yielding bullion will add more exhaustion in upcoming trading sessions. Gold bears could push futures to a low at $1987 before March 27, 2024.
Conclusion
Gold futures look ready to reverse from the overbought territory.
On the flip side, gold futures could reach $2204, while the second resistance could be at $2227.
Gold spot could face first resistance at $2199, while the second resistance could be at $2215.
Gold bears could have their target for spot gold at $1974 and futures at $1986 by March 27, 2024.
On the first trading session of this week, gold futures started with a little gap-down opening at $2181.73, hit the day’s high at $2189.11, struggling to defend the day’s low at $2174.94 due to the thick presence of bears in the overbought territory.
It is clear that gold futures have completed the formation of a bearish candle in the daily chart and could get a confirmation candle on Tuesday before sliding further.
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