Gold ended last week with a solid 1% gain. The yellow metal and other commodities received support from a drop in the dollar index. Therefore, gold managed to break a 5-week-long downward streak, when market participants revised their expectations on the U.S. interest rate level in 2023. This week is also full of other events that could have a significant impact on gold prices.
Within the next few days, investors will be focused on speeches of the Fed officials, including its Chairman Jerome Powell. He is going to give his report on Tuesday and Wednesday, regarding the regulator’s monetary policy. In fact, the U.S. policymaker is now expected to raise interest rates by 25 basis points at its next meeting on March 22.
The U.S. labor market data for February will be published on Friday. A modest gain of about 200,000 jobs is projected. January's growth stood at 517,000 jobs. However, February's figure could be the lowest monthly gain since the COVID-19 pandemic started. A long-awaited labor market cooling may finally give the Fed enough room to make a pause in its monetary tightening cycle. And that could be a positive sign for gold.
Although February proved to be the worst month for gold since June 2021, there are some positive effects of lower prices. Cheaper gold is driving higher demand, particularly from Asian countries. The metal’s imports in China are on the rise as investors seek to diversify their assets. Indian banks didn't buy gold for a certain period, but now they have resumed their purchase.
The near-term upside targets for gold might be the Fibonacci retracement levels of 38.2% (at 1865) and 50% (slightly above 1880). The RSI indicator confirms a buy signal.
The following trading strategy can be suggested:
Buy gold at the current price. Take profit 1 - 1865. Take profit 2 - 1880. Stop loss - 1840.
Traders may also use Trailing stop instead of a fixed Stop loss at their discretion.