Gold has rallied 3% over the past two days amid Powell's announcement of a fewer rate hike. Precious metal has already risen by 10%, which is a fairly large move for such a low-volatile instrument.
After such rapid growth, a technical correction is needed. After that, a new wave of growth may begin.
The US labor market data is due today. The main scenario indicates that there will be a slack in the labor market. This will confirm the Fed's intentions to ease the pace of rate hikes. This is evidenced by the current price of gold.
If the pace of the rate hikes slows down, we may not see the growth of the gold price. In this case, the saying “buy the rumor, sell the fact” may bring investors to action. Meaning speculators may try to take their profits after the release of the data. If the labor market shows strength, we will see a rapid fall in the price of gold.
In 2022, Gold hit key resistance at $1,800 an ounce. This level acted as both a support level and a resistance level, several times during the year. This level is marked with a rectangle on the chart. Now, it is highly likely that this barrier will materialize and gold will correct after the recent rise.
Overbought gold is also indicated by the MACD indicator on the daily timeframe. This indicator is at the level of its maximum marks this year. The only thing that hints at continued growth of gold prices is the moving average crossover on the MACD indicator.
Representatives of Gold.ru believe that at the moment nothing can contribute to the growth of gold above $1,600-1,800 per ounce. Meaning, they also believe that gold is at a local maximum.
The target of the correction is the traded November high of $1778. The 200-day moving average is also looming around.
A stop can be placed at the border of the $1,809 rectangle.
Most likely, after the publication of the data, the growth of gold price will be rather fast. Thus, it is better to place a stop and take profit orders in advance.
Most likely, gold will decline, thereby removing the overbought after the recent rally:
Take profit - $1,778
Stop - $1,809
This content is for informational purposes only and is not intended to be investing advice.