Prices for gold continue to move up slowly while waiting for statistics on inflation in the U.S. in December. Price volatility might be caused by yesterday's speech by Fed Chairman Jerome Powell at an event in Sweden. However, Powell, unlike his rather hawkish colleagues, did not make the situation about further interest rate hikes any darker, he used neutral language in his comments.
Meanwhile, more and more analysts are pointing at a good perspectives of gold this year. Thus, Erste Group Research economists report about a probable increase in the price of gold due to negative real returns on most other assets. Despite the sharp increase in interest rates by the Fed, ECB and other central banks, taking into account the inflation of government bonds yields of almost all developed countries remain negative. And until this situation changes, gold quotations will be provided with additional support.
Ole Hansen, head of commodity strategy at Saxo Bank, also said about the favorable environment for the main precious metal. Prices for gold will tend to increase based on expectations of recession in Western economies, growth of demand from central banks, as well as still high inflation.
From a technical point of view, there should be a golden cross on the gold chart, which is a cross of the 50-day moving average and the 200-day moving average from the bottom to the top. Such an event is a strong bullish factor for the prices for financial assets. In the case of gold, the previous time such a moving average cross occurred on February 10-11 last year, and thereafter the price rose over 13% in less than a month. For an asset as conservative as gold, this is a very powerful rise.
Tomorrow's data on the U.S. inflation rate is unlikely to result in a wave of gold growth similar to February-March of last year, but there is definitely some space for an uptrend. First of all, it is the round level of 1900, and then the highs of May-June 2021 about 1910.
The following trading strategy option can be suggested:
Buy gold at the current price. Take profit 1 – 1900. Take profit 2 – 1910. Stop loss – 1860.
Also, traders may use Trailing stop instead of a fixed Stop loss at their convenience.