On Monday, gold attempted to continue its strong rise of the previous week, moving above the benchmark level of 2000 at some points. After August 2020 and March 2022, this is only the third time in history that gold has cost more than $2000 per ounce. However, the quotes failed to maintain these heights, they were lost on a wave of profit taking in the first half of the trading session, and the day's closing was at a loss of 0.52%. The "bulls" did not manage to get above 2000 straightaway, so they can take a little pause for now.
At the moment, the main driving force of the precious metals market is the situation in the banking sector, which partially recovered at the beginning of the week amid the sale of Credit Suisse bank. However, timely measures on control of financial crisis do not guarantee the subsequent stabilization of the situation. Thus, stocks of First Republic Bank fell by 33.5% on Monday after the downgrading of the bank's credit rating by S&P Global.
The price of gold this week will also depend on the U.S. Federal Reserve's position. Any "dovish" statements after tomorrow's meeting of the U.S. regulator may support gold. At the same time, the Fed is unlikely to change its policy sharply, as this can only increase investor fears about the seriousness of the problems in the banking sector. A minimum increase in interest rates by 0.25% to the range of 4.75-5% seems to be a compromise, which is now expected by almost 80% of market participants.
In time left before the Fed meeting, gold may gradually decline to the previous local highs of the beginning of February (1950-1960). The RSI indicator needs to remove the overbought condition, which also shows that the gold price will continue to pullback. Further dynamics of gold will be determined by the actions of the Fed and its representatives' comments.
The following trading strategy option can be suggested:
Sell gold at the current price. Take profit 1 – 1960. Take profit 2 – 1950. Stop loss – 2000.
Also, traders may use Trailing stop instead of a fixed Stop loss at their convenience.
This content is for informational purposes only and is not intended to be investing advice.