Gold Futures Longing for the Gains of the Past

Gold futures (COMEX: GC) suffered another day of losses on Wednesday, as stronger-than-expected retail sales in the US sent it to a new six-month low. Earlier in the week, inflation statistics suggested that the US market is expanding quicker than expected, causing a first downturn in the market for gold futures, leaving traders longing for the returns the precious metal generated in the early-year rally. 

In January, US retail sales were up 3%, compared to the 1,9% estimate, adding fuel to the expectations of a more aggressive stance from the Fed in their next monetary policy meeting, initially sparked by the 6,4% annualised inflation statistic. These expectations provide momentum for the US dollar to push up, making gold more expensive to foreign investors. Higher treasury yields limit the upside for the non-interest metal, as the 10-year US treasury yield is up 6,6 basis points to 3,82%. 


A downward trend formed in the market for gold futures in the last couple of weeks, as its non-interest-paying nature is forcing a flow of money away from the metal towards the cash market in search of higher returns. More downside may be on the cards for the futures until some fundamental change occurs. The futures are trading below the 50-day moving average, and the RSI is showing signs of oversold conditions, with bearish momentum holding. The market found support on Wednesday at $1840,2 per ounce following a push down after the retail sales announcement. This support could drive the futures up to meet the downward trending resistance at around $1859,9 per ounce for the formation of a new lower high. If the market continues to resist, there could be more downside on the cards, bringing support at $1840,2 per ounce back into play. A breakout to the downside could provide the momentum for the bears to force the market to seek support lower at $1800,3. The catalyst for this move could be the release of the US jobless claims later today, as a further indication of a strong labour market could, in fact, tempt an overreaction from the market and open up more downside possibilities.  


The market for gold futures is trending downwards. There could be a potential short entry for a trader at $1859,9 per ounce if the US jobless claims signal a stronger-than-expected labour market. This move could see the futures looking for support at $1840,2 and $1800,3 per ounce. 

Sources: Koyfin, Tradingview