Technical Says Gold Is Struggling, But Intraday Futures and Long-Term Dynamics Suggest Opportunity

The devaluation of the dollar—driven by Trump’s sweeping tax cuts, rising deficit concerns, and a shift among central banks toward gold as a hedge—has lifted the metal’s value relative to the dollar. Geopolitical tensions have only reinforced this trend. Despite strong underlying fundamentals, technical indicators are beginning to signal a potential downside setup. Still, risk-averse sentiment and fading confidence in the dollar continue to provide support. For futures traders, this blend of volatility and uncertainty offers more trading opportunities—and greater profit potential. Here’s a closer look at intraday arbitrage and longer-term trades, which currently present better prospects than tough stock plays.

Technical Bearish for Gold Chart

Let’s start with the chart. Gold futures reached a record high on April 22. After a correction, the next peak on May 7 failed to break that previous high, forming a classic “lower high.” Meanwhile, the support from May 2 was broken, producing a “lower low.” This combination indicates that gold may be entering a downward trend, at least from a technical standpoint.

Under this outlook, $3,400 could act as tough resistance. Without any breakthrough news or catalyst to ignite fresh buying, gold may continue to follow this downward trajectory.

But Fundamentals Still Support Gold

That said, the fundamentals don't support a sharp collapse. Gold is still up roughly 25% year-to-date and has posted gains for three consecutive years. Trump’s unpredictability adds fuel to the fire. As seen last week with his sudden tariff threats against Europe, the risk of a renewed trade war is never far off. Meanwhile, his proposed tax cuts could balloon the deficit, trigger debt concerns, and undermine Treasury credibility—all of which build a floor under gold prices.

Historically, gold has maintained a tight relationship with the dollar index. While geopolitical noise—whether from the Middle East or Russia-Ukraine—can cause short-term disruption, the larger trend is clear: a weaker dollar often coincides with a stronger gold price.

Gold vs. Dollar

Just how strong is this relationship? A scatterplot of daily gold futures returns versus daily changes in the dollar index shows that gold tends to rise when the dollar declines. This makes sense: gold has a fixed global supply, so when the dollar loses value, more dollars are needed to buy the same amount of gold. That scarcity and purchasing power dynamic is what gives gold its reputation as a safe-haven asset and hedge during times of crisis.

Gold Daily Return vs. Dollar Index Daily Return

From January 2022 to now, the correlation between daily gold futures and the dollar index sits at -44%—a moderate negative relationship. Narrow that window to just this year, and the negative correlation strengthens to around -50%. That confirms the relationship has become more pronounced in today’s volatile macro environment.

Leverage Gold-Dollar Dynamics for Intraday Trades

This strong correlation could unlock more intraday arbitrage opportunities. Take Monday’s session, for example: both gold and the dollar index initially edged lower after Trump announced a delay on 50% of the tariffs targeting Europe. The move eased risk-averse sentiment, putting downward pressure on gold.

However, as the dollar index continued falling, gold rebounded—highlighting the inverse relationship. Gold pushed upward until reaching point B, where both assets began rising simultaneously. At that stage, with the dollar showing signs of recovery, the better strategy was to gradually short gold, since the two moving in the same direction often signals a reversal is near.

Later, as the dollar bounced back, gold began to slide again—reaffirming the negative correlation. A similar pattern repeated at point C.

This intraday arbitrage can be highly effective. But it also comes with risk. Since Monday was a relatively quiet session with no scheduled market activity, the dollar became the primary driver. However, a surprise development—like a sudden drop in the dollar during an uptrend—could quickly reverse the narrative. That’s why it’s essential to use stop losses and limit orders to manage risk.

Longer-Term Strategy: Trade the Struggle, Not the Sentiment

As outlined above, while technical signals point toward a bearish phase, the fundamentals remain strong. This mixed picture gives investors several ways to play the trend.

The Aggressive Play: Some may choose to short gold based on the technical breakdown, betting that the dollar could regain strength after a recent pullback. If that plays out, gold might revisit the $3,250 level—a ~2% decline from current prices—with amplified returns via leverage. If the bearish momentum continues, the next key support could be around $3,180, where dip buyers may re-enter, driven by hedging needs amid heightened uncertainty.

The Defensive Play: Gold has been extremely volatile since Trump re-entered the political scene. Price movements often come in sharp spikes or sudden drops—perfect opportunities for reactive strategies. If gold briefly breaks above the previous high (~$3,400) without strong supporting fundamentals, it may quickly retreat. That would present a chance to short with defined stop-loss levels.

Conversely, if panic selling drags prices lower, gradual dip-buying could be wise. Despite short-term dominance by fear-driven trades, long-term demand for gold as a hedge remains strong.

Overall, with equities facing heightened uncertainty following the recent rally and unclear outlook, gold stands out as a more tradable asset. Its combination of volatility and solid fundamentals continues to offer opportunities—especially for futures traders, where T+0 settlement provides a powerful edge.