Volatility of gold prices is declining in anticipation of today's release of the U.S. business activity data. Positive data will show the strength of the U.S. economy, and in that case the price of gold may continue its downward trend.
Most analysts are bearish on gold this week. Last week, seventeen Wall Street analysts took part in a Kitco News survey regarding the gold market. Thirteen analysts (76%) expressed a bearish view on gold. One analyst (6%) was optimistic about this week, while the other three (18%) said that the price would remain flat. Despite the negative sentiment in the gold market, some analysts hope that economic uncertainty will continue supporting the precious metal in the long term.
Gold purchases are supported by expectations of further incentives from China, along with the government's support measures for the housing sector in the country. However, according to the latest data, China's recovery after COVID-19 is driven by such sectors as retail and services, while the industrial sector remains depressed.
On the other hand, the recent statements made by the Fed representatives were quite ambiguous and, as a result, raised doubts regarding the regulator's possible revision of its policy.
According to technical analysis, the price of gold has formed a downtrend on the hourly timeframe. On the daily timeframe, if one draws the Fibonacci grid from the highs to the lows of the previous year, it shows that the gold price is now testing the important level of 0.5 Fibonacci. It should be mentioned that the price has already fixed under this level, which means that it is now trying to go back above this resistance. Most likely, the gold price will renew its local lows after testing the level.
Returning to the hourly timeframe, the prices are now at the upper limit of the downtrend. Therefore, there is an opportunity to form a short position. The target of this downward movement will be the level at local lows of $1820. Stop-loss will be placed above the upper limit of the upward trend, with some reserve to exclude its accidental triggering. Stop will be around the level of $1851.
A decrease in the price of gold:
Take profit — 1820
Stop-loss — 1851
This content is for informational purposes only and is not intended to be investing advice.
