Following last week's significant 50-basis point rate cut by the Federal Reserve, gold futures are poised for a potential sell-off, especially since they have been trading in overbought territory. The December futures saw only a 0.5% rise, indicating early signs of weakness in gold prices.
Analyzing the weekly movements in gold futures, it appears they may start to slide from their current levels. This stagnation suggests that a selling spree could be on the horizon.
On the daily timeframe, while gold prices consistently trade above the 200-day moving average, historical trends indicate that returns are generally flat 1-6 months after reaching such extremes.
Recent price action has revealed exhaustive candles on the daily chart over the past three days, signaling a potential end to this rally. Without a strong catalyst to boost gold prices, further upside seems limited, reinforcing the likelihood of a reversal.
Moreover, gold futures struggled to maintain the gap up formed on September 22, 2024. This week, they may face a decline that could push them below the critical 200-day moving average.
In conclusion, I anticipate that gold futures could retest the level of 2424 amid growing optimism among gold bulls. Current market movements indicate that if gold futures break down below this level, prices may experience rapid exhaustion.
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Disclaimer: This analysis is purely based on the technical observations.