Gold quotes started Monday's trading with a serious drawdown, at some moments the price even fell below the level of 1950. However, during the second half of the day the losses were neutralized, and the trades closed with an increase by 0.7%. Again, it can be seen that drawdown buyout tactics remain prevalent in the gold market. Probably the new test of the 2000 mark per ounce is not far away.
Yesterday morning's drop in gold was caused by the decision of OPEC+ countries to cut oil production further starting from May. There are concerns that higher prices for oil will cause a new round of inflation and will not allow central banks to reduce interest rates. Accordingly, gold may not get much support from the easing of monetary policy.
However, some analysts disagreed with this forecast. According to Ole Hansen from Saxo Bank, gold will try to overcome the level of $2,000 per ounce one more time. It is expected that the current increase in oil prices will not cause a significant jump of inflation, which could put pressure on gold. This will allow the Fed to begin reducing interest rates in the second half of 2023.
However, even if monetary policy easing is postponed to a later date, the demand for gold as a safe asset remains high. Standard Chartered analysts noted a steady increase in demand for gold by ETF and retail sellers. The operations with the yellow metal increased over the past two weeks at the fastest rate since June 2019.
Since March 24, when gold last tested 2000, the RSI indicator has become less overbought. Thus, now there are more chances for a steady rise in gold prices. Also the upward trend, which began in the middle of March, is also favorable for the price growth continuation. Since then, the closing price has never dropped below the trend line.
The following trading strategy option can be suggested:
Buy gold in the range of 1975-1985. Take profit – 2000. Stop loss – 1965.
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.
