Gold is consolidating in a narrow range of 1830-1850, expecting new triggers for a directional movement. Based on the price at the end of the trading session, yesterday gold hit a lowest level since the beggining of 2023, and the RSI indicator entered an oversold zone for the first time since September 2. This is not a strong rebound, but it can be a good momentum for building up long positions.
Yesterday's data on U.S. business activity failed to make the bulls in the gold market pleased. The service sector figures, along with the composite index not only rose sharply, but also crossed the top-down threshold of 50, which separates economic contraction from growth. Such positive statistics gives the Fed enough reasons to continue its interest rate hike cycle, thus putting pressure on gold quotes.
Ronald-Peter Stoferle at Incrementum believes that this is the right time to create a strategic position in the gold market by averaging, i.e. making purchases at gradually declining prices. He also noted that real bond yields are now positive due to U.S. inflation concerns. Therefore, gold might not show strong growth in the next couple of weeks.
But there is still a risk of recession in the U.S. economy. In this case, the Fed will have to roll back the cycle of aggressive monetary tightening. Stoferle expects more rate cuts after a rise in unemployment, that’s why gold is still on track to finish the year above $2,000 an ounce.
Gold drawdowns below 1830 have been consistently redeemed, suggesting increased demand for this precious metal. So, it is possible to buy gold at these levels step by step, hoping to see a resumption of growth in the future.
The following trading strategy can be suggested:
Buy gold when it drops to the range of 1820-1830. Take profit 1 - 1850. Take profit 2 - 1860. Stop loss - 1800.
Traders may also use Trailing stop instead of a fixed Stop loss at their discretion.
This content is for informational purposes only and is not intended to be investing advice.
