Inflation data put pressure on gold

Over the last trading sessions gold has continued to show its weakness. U.S. inflation data were negative for the precious metal prices.

The U.S. Department of Commerce announced on Friday that the core Personal Consumption Expenditures Price Index (PCE) in January was 4.7% against 4.6% in December and the consensus forecast of 4.3%. The PCE index is the one closely monitored by the Fed when making its key rate decisions. Bond yields increased due to expectations about the Fed’s rate hike to 6% or even higher as part of its current policy tightening cycle. Previously, investors expected a softer rate hike.

According to Commerzbank economists, gold is facing several headwinds. At the same time, the prospect of further interest rate hikes by the Fed might become a key factor that puts pressure on the price of the precious metal. The largest and world’s most liquid gold ETF recorded fund outflows last week. Earlier, experts observed a slight inflow, which gave hope for the return of investors to the ETF.

Investors' high expectations for a rise in gold prices this year begin to fade. However, gold remains quite interesting for long-term investment.

According to the technical analysis, gold continues to move within its downtrend. At the moment, the price of gold has stabilized in the middle of this trend.

Let's build a Fibonacci grid from the lows of last year to the current local highs. We see that the level of 0.382 was crossed, and the following target is the 0.5 Fibonacci level. It is often the strongest, and there will probably be some attempts of bouncing back from it. Amid negative fundamental news for gold, we assume its departure to the lowest trend limit and support in the form of Fibonacci levels. Therefore, the downside target will be at $1,790. Stop-loss will be set at the upward breakdown of the downtrend and crossing the level of 0.382, which is equivalent to $1,830.

Gold prices are likely to decrease:

Take profit – 1,790

Stop-loss – 1,830