Looking to the Futures

Gold prices continued to trend lower on Monday but found support this morning rallying +6% prior to the equity market open. Last Friday precious metals plummeted after President Trump announced he had nominated Kevin Warsh as the new Fed Chair. The partial US government shutdown is expected to be short lived and geopolitical tensions in the Middle East are easing, which lessens safe haven demand for gold. In the bull camp we are seeing increased activity in the debasement trade and the weaker dollar could lead to precious metals as a store of value. Central bank demand and fund purchases for gold remain strong. 

The dollar index increased on Monday on carryover support from President Trump’s nomination of Kevin Warsh as the next Federal Reserve Chairman. Kevin Warsh is seen to be more hawkish than other Fed Chair candidates and could be less supportive of deep interest rate cuts. He has stated his concerns on inflation risk during his tenure as a Fed Governor from 2006-2011. The FOMC is expected to cut interest rates by -50 bp in 2026.

The US government has been partially shut down for three days, but the House of Representatives returned from a week-long break on Monday and is expected to vote on the spending bill today. President Trump announced a tentative deal with Senate Democrats to avert a full shutdown last Thursday. This deal would provide two weeks of funding to the Homeland Security Department and allow more time for negotiations on immigration enforcement and full-year funding for other departments.

The US Jan ISM manufacturing index rose +4.7 to 52.6, beating the expectations of 48.5 which could be bullish for the dollar index.

Geopolitical tensions in the Middle East appear to be easing after President Trump announced the US is in talks with Iran to find a diplomatic resolution and avoid a war. These talks have reduced safe haven demand for precious metals but concerns around US tariffs, large US deficits, and tensions in Ukraine and Venezuela could provide support for gold prices.

Markets are seeing increased demand on the dollar debasement trade. This trade strategy involves shifting capital from fiat currencies, such as the US dollar, into hard assets like gold, Bitcoin, and real estate to hedge against the devaluation of the fiat currency. 

Central bank demand for precious metals remains strong with China's PBOC gold reserves increasing +30,000 troy ounces to 74.15 million troy ounces in December. The World Gold Council reported that global central banks purchased 220 MT of gold in Q3, a +28% increase from Q2. Last Wednesday, fund demand for precious metals climbed to its highest level in 3.5 years.

Looking at the daily chart for the Gold Futures February 2026 (/GCG26) contract we can see the significant sell-off on higher-than-average volume since last Thursday. The contract has traded below the 20-Day and 50-Day Simple Moving Averages but was able to rally back yesterday to close above the 50-Day SMA. 

The daily technical summary from Hightower Research shows support levels for the February contract at 4492.5 and 4226.0 with resistance levels at 5232.9 and 5706.9. However, the majority of trading volume is moving to the April contract (/GCJ26). 

According to the CFTC Commitment of Traders report released January 27^th managed money traders have reduced their long position by -20,347 contracts and decreased their short position by -1,062 contracts. Managed money traders were net long 118,159 contracts as of the time this report was published. 

The 14-Day Relative Strength Index at 48.80% shows a sharp decrease after the onslaught of selling over the past three sessions. 

Major economic reports, trading events, and news items that could potentially impact specific futures markets:

S&P Global US Manufacturing PMI™ Finalfor January (interest rate and stock index futures)

ISM Manufacturing PMI for January (interest rates and stock indices)

Construction Spending for December (interest rates)

U.S. Treasury Refunding Financing Estimates (interest rates)

20-Day SMA                    4,756.4

50-Day SMA                    4,479.6

200-Day SMA                  3,845.6

14-Day RSI                       48.80%

Implied Volatility              35.59%

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