Gold prices started 2023 with a rise, adding 2.4% over the past week. The failure on January 5 was fully repurchased the very next day, which underlined the high demand for gold, especially at lower prices. Meanwhile, in the short term there is still a potential for growth to the level of 1910.
The key factor for the dynamics of gold, as well as last year, so far remains the monetary policy of the leading central banks. Expectations of an imminent end for the cycle of rising interest rates are benefiting the prices of all dollar-denominated commodities, including gold. Even the very hawkish protocols of the last Fed meeting, published last week, put pressure on the quotations of the main precious metal in the context of the only one trading session.
First of all, this week market participants will be watching the statistics on inflation in the U.S. for December. Its publication on Thursday, January 12, may give gold another boost, of course, if the declining inflation trend continues. The consensus forecast assumes a slowdown in price growth from 7.1% to 6.5%.
Positive news for gold came from Asia on the weekend. The People's Bank of China added another 30 tons of gold reserves in December after the first restocking in three years in November. Stable demand from central banks could give gold buyers additional confidence, pushing prices even higher.
Today, gold quotes have entered the 1875-1880 range where the maximums of June 2022 and November 2021 are located. In case it holds on to those levels, the next growth target would be 1910, the maximums of May 2022 and the summer of 2021.
At the same time, the RSI indicator is gradually approaching the overbought zone, which means that the probability of some correction increases. It is possible that the fixation of profits for the buyers of gold will be seen when the price rises above the round mark of 1900.
The following trading strategy option can be suggested:
Buy gold in the range of 1870-1880. Take profit – 1910. Stop loss – 1855.
Also, traders may use Trailing stop instead of a fixed Stop loss at their convenience.