Gold quotes, as well as the prices of other financial assets, reacted negatively to the results of the Fed's penultimate meeting this year. Timid hopes for softening the position of the American regulator again failed. However, according to Jerome Powell, there are already doubts about the need for further rate hikes at such a high pace, as it happened the last 4 times. It is possible that the pace of tightening will slow down as early as December, which could have an extremely favorable effect on the prices of all dollar-denominated assets, including gold.
The main precious metal is not in great demand among investors this year. After a sharp jump in February-March against the backdrop of growing geopolitical tensions, gold then moved into a steady downward trend and by the current moment, the price has decreased by more than 20% from the high that was around the level of 2070 on March 8.
It would seem that the sharp rise in inflation to world highs over the past decades should create fertile ground for rising gold prices. But in the current situation, the dollar has become the main safe-haven asset for almost all investors, and precious metals as instruments that do not bring any interest income, have ceased to be in demand. Nevertheless, the situation has already begun to change, at least at the level of central banks.
According to the World Gold Council (WGC), in the third quarter, central banks carried out the most massive purchase of gold into reserves since 1967, stocks were replenished by almost 400 tons, 4 times more than last year's figure. It is unlikely that leading financial regulators would be so active in buying gold if they believed that it would continue to steadily fall in price. Rather, they expect that in the coming months the Fed will begin to gradually move away from its “hawkish” positions, as regulators in Australia and Canada have already begun to do. And after the pivot of monetary policy, gold prices will also turn around.
The following trading strategy option can be offered:
Buy gold in the range of 1615-1630. Take profit – in the 1660-1670 zone. Stop loss – 1600.
Also, traders, at their discretion, can use Trailing stop instead of a fixed Stop loss.
This content is for informational purposes only and is not intended to be investing advice.
