Gold sell

Decline in gold prices might continue unless macroeconomic data prevents it

18 January 2023 180
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The gold price reached its first correction target that had been described in our forecast a couple of days ago. Indirect indicators that signalled the correction were proved correct. In particular, the 10-year U.S. bonds remained at relatively same levels, while the Dollar Index started showing signs of a reversal after a long period of decline. There’s still some space to grow for the dollar before the first resistance levels, so, the pressure put on gold may persist. 

Meanwhile, analysts are still producing optimistic gold forecasts for the current year. Although there actually are some real growth drivers for gold, such a massive call to buy gold might make one wonder and look deeper at the market situation. 

In November, analysts at HANetf conducted a survey among wealth fund managers, and most of them expressed an intention to expand their gold reserves in 2023. A total of 100 specialists from the EU countries and Great Britain were surveyed, and 89% of respondents said they were planning to invest more in gold. As it was noted by the managers, demand for gold from central banks is the main growth driver for the gold price.

New economic data on inflation in the EU countries are to be released today, as well as a new reading of the U.S. producer price index. Investors’ expectations are naturally optimistic, as a slowdown in inflation is anticipated. These factors are considered by investors in the current evaluation of the gold price. A pace of inflation slowing plays a significant role. If the released data turn out to be too optimistic, gold may surge, so it’s necessary to set a short stop when opening short positions.

According to the tech analysis, the next downside target will be a limit of an upward trend, which begins with the gold price lows of the previous year, or the level of $1,876. Stop-loss is set slightly above the resistance level on an hour timeframe at around $1,907.

The 200-day moving average might become an additional obstacle on a way to the target. However, we have already witnessed this moving average to be pierced downwards several times over the recent weeks.

A decline in the price of gold:

Take profit – 1,876

Stop-loss – 1,907

This content is for informational purposes only and is not intended to be investing advice.

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