Following yesterday's sharp pullback, gold has the potential to resume its record-breaking trajectory, particularly as investors position themselves for a stock market correction. However, this outlook is tempered by analysts now discounting only two Federal Reserve (Fed) rate cuts this year, a reassessment driven by a series of cautious remarks from policymakers that has strengthened the greenback. Current pricing reflects only 43 basis points of easing across the two remaining policy meetings.
To see a new bullish impulse for the precious metal, market players will be looking for signals in forthcoming US reports on durable goods orders, jobless claims, and existing home sales. The regulator's preferred inflation gauge, the PCE index, will be of paramount importance.
Technically, the short-term picture for bullion remains unchanged, with the daily chart still indicating overbought conditions that warrant buyer caution.
Gold's role as a safe-haven asset and a hedge against inflation and currency depreciation is well-established. This stems from its independence from any specific issuer or government. For this reason, the metal is viewed as a good investment during periods of economic headwinds. Therefore, it would be wise to consider making additional purchases after a potential correction to $3,710 per ounce.
The overall recommendation is to buy gold from the $3,710 support. Take profits at $3,775. Fix losses at $3,675.
Calculate your open position so that a potential loss (protected by a Stop Loss order) is limited to 1% of your deposit. If your account balance does not allow entering a position of this size, it is better to skip the trade and wait for other market signals that meet low-risk criteria.
This content is for informational purposes only and is not intended to be investing advice.
