The last three sessions gold has been making tiny attempts to recover. Fed members continue to comment on the need for further rate hikes. Meanwhile, on the hourly timeframe, a technical analysis pattern called the flag was formed.
All of the Fed officials, who were speaking this week on the future path of monetary policy, noted the growing probability that interest rates will continue to rise.
Despite some success in fighting against inflation, other factors, including a strong labor market, could cause further tightening and two more rate hikes.
For the last couple of months, literally all forecasts for gold have been bullish. Now there are skeptics about future price increases. Their main argument to lower gold is central bank policy, namely the continued tightening of monetary conditions, despite the decline in inflation. We agree with the statement that the market has reacted very strongly to the inflation peak in the world and now there may be a return to reality.
Hugh Roberts, head of research at Quant Insight, claims that gold is overvalued. He added that at its recent peak, gold was about 6.5% more expensive than its real value.
Although the correction has cooled the market a bit, but gold could be under pressure from the macroeconomic background in the short term perspective. Quant Insight estimates the true value of gold at $1822.
Roberts said that the impulse for gold growth from central bank purchases has gradually exhausted itself, and investors are now focused on monetary policy, which may become a problem.
According to the technical analysis on the hour timeframe, a flag pattern was formed. Moreover, the trend of this figure is directed downward and there is a high probability of renewal of new local minimums in gold prices. However, it will be possible to look on the figure realization only after the fact. At the moment it can be tried to win back the local movement inside this flag, as the quotations are closer to its upper boundary.
The downside target will be the lower trend line at $1,875. Stop-loss logically can be set beyond the upper boundary of the flag at $1893.
Decrease in the price of gold:
Take profit – 1875
Stop-loss – 1893
This content is for informational purposes only and is not intended to be investing advice.