The start of the new week was relatively positive for gold quotations: attempts to push the price below the 1860 level were suppressed, after which a gradual recovery began. The rate of growth is not impressive yet, but the slow upward movement has an obvious advantage - a noticeably reduced probability that the technical indicators will sharply enter the overbought condition.
Yesterday the factor of uncertainty for gold quotations was the speech of Federal Reserve Chairman Jerome Powell, during which he expressed some ideas about the future of the monetary policy in the U.S. Powell confirmed the high probability of further interest rate increases by the Fed as well as other central banks, due to a strong labor market and still high inflation. But at the same time, Powell noted the beginning of "disinflation" and asked for patience to let prices decrease.
The markets viewed these statements as a sign of some success in the fight against rising prices. That put some pressure on the dollar and contributed to the rise in gold prices on Tuesday. In general, gold remains a perspective asset in 2023, as there is a good chance of a reversal of the Fed's current hawkish position and a possible recession could also increase demand for the precious metal.
The continued purchase of the main precious metal by central banks contributes to the rise in prices for gold, and China plays a leading role here. In January, the People's Bank of China increased its gold reserves by another 15 tons. Since the physical market shows a high demand, few speculators would risk betting big on a decrease in the price of gold, except for a short-term correction.
On the chart, the main target for gold now is a return to 1900 and then to 1915. Just in the 1900-1915 range another pullback is possible, after which the upward trend will renew.
The following trading strategy option can be suggested:
Buy gold at the current price. Take profit 1 – 1900. Take profit 2 – 1915. Stop loss – 1870.
Also, traders may use Trailing stop instead of a fixed Stop loss at their convenience.
This content is for informational purposes only and is not intended to be investing advice.