Yesterday gold prices that slightly corrected at the beginning of the week started to rise again. The macroeconomic situation is now developing in such a way that any substantial fall in gold prices is considered by market participants a good opportunity to increase their long positions. After the first unsuccessful attempt to break through the symbolic level of $2,000 per ounce bulls get another chance to try.
Recently, all traders’ and investors’ attention was focused on the second Fed’s meeting this year. The U.S. central bank raised interest rates by 25 basis points to the range of 4.75-5%, thereby confirming market forecasts on the size of hikes. Since the Fed’s actions were not a surprise to the market, the following Jerome Powell’s press-conference gained even more importance.
The Fed Chair announced a high probability of yet another rate increase, after which the cycle of monetary policy tightening might come to an end. Obviously, the easing of the U.S. regulator’s position was driven by problems in the banking sector. In fact, the financial system itself has already reacted to the difficulties of some banks by tightening loan conditions. Consequently, an additional restriction of economic activity by raising the key rate becomes unnecessary.
Gold is primarily seen as a secure investment that hedges against financial instability and high inflation. At the same time, the yellow metal wins when interest rates fall. The U.S. treasury bond yields dropped, and the dollar hit the lowest level in almost seven weeks, thereby increasing the attractiveness of precious metals.
The gold price correction at the beginning of the week helped to overcome the overbought condition of the RSI indicator, however, a quick return to the growth might form a technical signal to sell. But the upcoming week is not full of important events, and gold will have an opportunity to rise more gradually. The main target is the same — to approach the level of $2,000 again.
The following trading strategy may be offered:
Buy gold at the current price. Take profit 1 – 1,990. Take profit 2 – 2,000. Stop loss – 1,965.
Traders may also use a 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.