Buying gold from $3,450 support

The cost of living for Americans continues to rise, and the labor market seems to be on shaky ground, creating a complex economic situation that may be difficult to resolve. According to data released Thursday by the US Bureau of Labor Statistics, consumer prices rose 0.4% in August, pushing annual inflation up to 2.9%—the highest rate since January. This is a jump from the 2.7% gain markets saw in July. Food costs increased by 0.6%, marking the largest monthly surge in nearly three years. Meanwhile, gasoline prices were 1.9% up, reversing a 2.2% decline in July. Yesterday's release of the Consumer Price Index provided further evidence that people are bearing the costs of President Donald Trump's sweeping immigration reform and high import tariffs. Wages aren't growing as much as they used to either. Real (inflation-adjusted) hourly earnings fell to 0.7% in August, the lowest in more than a year, as the Statistics agency claimed.

The Fed is almost certain to ease monetary policy next week, as Chairman Jerome Powell said, citing recent labor market weakness. The question is how big the reduction in borrowing costs will be and whether a standard quarter- or half-point rate cut will satisfy Trump, who has taken a much more aggressive stance. Right now, traders are still pricing in an 89% probability that the regulator will move towards a 25-basis-point reduction next week. There is only an 11% chance that it will go down by 50 basis points.

All of this negativity casts a shadow of a looming recession and causes capital to flow into safe-haven assets, including gold. However, from a medium-term perspective, the precious metal appears overvalued. Therefore, it is recommended that you wait for quotes to return to the $3,450 multi-month support before making purchases.

The overall recommendation is to buy gold. Profits are taken at the $3,690 level. Stop loss is set at $3,280.

The volume of your open position should be calculated so that the potential loss (protected by a Stop Loss order) does not exceed 1% of your deposit. If your account balance does not allow opening a position of this size, it is better to avoid entering the market on this signal and wait for other trade options that meet low-risk criteria.