Gold was finally able to make a full-blown corrective wave at the end of last week. The uptrend was broken and the quotations fell to the first significant Fibonacci retracement level of 0.236 from the whole growth wave. It seems that from this level it is safe to open long positions.
However, in fact, there was a break-down of this level and the gold has been trying to consolidate below it for the second day. The current retest of this level and moving below it could mean a continuation of the bearish movement.
The reason for the decline in gold was the strong statistics on unemployment in the U.S. This data increases fears about the continuation of raising and holding interest rates by the Federal Reserve System. This is said by representatives of the Fed.
Rafael Bostic, president of the Federal Reserve Bank of Atlanta, stated that a strong report on employment for January makes it more probable for the central bank to raise the interest rate to a higher level than previously expected by politicians.
Bostick repeated that his baseline scenario still assumes that the rate will peak at 5.1%, which corresponds to the median of December forecasts by politicians. The rate will remain at that level during 2024.
A higher peak in the rate could be achieved by an additional one-quarter point increase over the two points currently anticipated. Bostick said that the Fed might also consider the possibility of returning to a 50 basis point rate hike, although he does not expect it.
It was said above that gold is now testing the 0.236 Fibonacci level. At the moment the level has been broken down and now it is being tested from the bottom to the top. Now, if there is a fixation lower, it will be a reliable signal for the continuation of the downtrend in gold.
Thus, we can open short positions with a target at 0.382 Fibonacci level. Support can also be seen there in the form of a November-December 2022 pro-trade. This downside target corresponds to a price of $1,833.
Stop-loss can be set at fixing above the Fibonacci level of 0.236 and at the return to the rectangle. Thus, the stop-loss will be at $1905.
Decrease in the price of gold:
Take profit – 1833
Stop-loss – 1905
This content is for informational purposes only and is not intended to be investing advice.
