On Friday, gold prices are fluctuating near a nine-month high after a sharp increase in the previous session. Gold has been rising for the fifth successive week amid growing demand for this metal due to lowering headline inflation and potential reverse of global central banks in relation to their key rates.
As it was said by European Central Bank President Christine Lagarde, inflation is still too high. She pledged that policymakers wouldn’t let up in their efforts to return price growth to the target level.
According to Laragde’s statement made on Thursday at a panel in Davos, inflation remains high by all accounts, no matter which way it is looked at. She said that the ECB will stick to its course of monetary policy until it reaches the rate level at which it will be possible to return inflation to 2% in a timely manner.
Despite a slowdown in headline inflation, the ECB doesn’t intend to relax efforts in its curbing. Rate lowering delivered too soon could push inflation to new highs. This information has a negative effect on the price of gold, which is now at its local highs.
As shown by the tech analysis, the gold price attempted to renew its local highs. However, an upside breakout turn out to be false, and the quotations returned below the level of the previous growth momentum.
The correction reached the support level on the hourly timeframe, and a reversal might happen at this point, as well as an attempt to reach new highs.
But at the same time, the MACD and RSI indicators signal an overbought condition of gold on both daily and hourly timeframes. So, a possibility of a sideways movement cannot be excluded. A similar movement has been spotted in the price of silver for several trading sessions. Possible shaping of a rectangle is drawn on the chart. According to it, the price is now at its upper limit. So, it might be worth opening short positions aimed at reaching the bottom level of the figure at $1,907.
Stop loss might be currently placed slightly above the yesterday’s high outside the rectangle at the level of $1,937. If the highs are renewed, a new bullish impulse is possible.
A decline in the gold price:
Take profit – 1,907
Stop-loss – 1,937
This content is for informational purposes only and is not intended to be investing advice.
