The gold hit a 9-month high, as it was expected in last week's report. Profit-takers have been active at 1935 and above, pushing the price back closer to its midweek levels. With no new triggers for price movements, traders may switch to more volatile instruments, and gold is likely to regain interest later.
The surge of interest in precious metals might take place on Thursday, when the first U.S. GDP estimate for Q4 2022 will be released. It would be better for gold if the GDP data turn out to be worse than expected. This could further strengthen expectations that the economy might enter recession, with the dollar getting weaker. On the contrary, Q3 performance proved to be better than estimated. In case this scenario plays out again on Thursday, gold will be prone to decline.
This week is a lull period ahead of the major meetings between the world's financial regulators. The Fed, the ECB and the Bank of England are scheduled to meet on February 1 and 2, in order to determine their monetary stance. The officials' soft rhetoric may spark a new surge in gold and other precious metals, whereas the prospect of further rate hikes will trigger a deeper correction.
Besides, some passivity of trades during this week can be explained by the national holidays in China due to the New Year based on the lunar calendar. Therefore, there will be no relevant statistical data on the Chinese economy in the coming days.
The gold is unlikely to see a massive swing before Thursday or next week, but there are profits to be taken out of the current correction. The decline in gold to 1910 and 1900 would relieve the overbought conditions in the technical indicators, but it is not going to hurt the uptrend.
The following trading option can be suggested:
Sell gold in the 1920-1925 range. Take profit 1 - 1910. Take profit 2 - 1900. Stop loss - 1935.
Traders may also use Trailing stop instead of a fixed Stop loss at their discretion.
This content is for informational purposes only and is not intended to be investing advice.
