Gold quotes made another attempt to break above the level of $2,000 per ounce at the end of last week, as expected. A significant part of traders again used the upward movement to fix profit, those who want to additionally build up long positions at such high prices are still the minority. Now, gold may roll back to the 1935-1950 range, where demand for the yellow metal has all chances to increase.
Friday's decline in gold quotes had fundamental prerequisites in addition to a technical rebound from the resistance of 2,000. Statistical data on U.S. economics exceeded expectations, and hawkish comments from some Fed officials made the dollar strengthen and put additional pressure on the main precious metal.
The U.S. Manufacturing PMI rose to a five-month high of 49.3. Services PMI jumped to 53.8, this is a maximum of 11 months. In addition, St. Louis Fed President James Bullard said about the probable additional increase in interest rates after the easing of stress in the banking sector. He raised his estimate of the maximum level of rates in the current cycle of monetary tightening to the range of 5.50-5.75%.
According to the forecast of Commerzbank economists, gold prices may again come under pressure, as the market will be forced to adjust its expectations on the level of interest rates. Now, many investors predict that the US Federal Reserve System will start to ease the monetary policy this year. However, Commerzbank experts believe that the market will have to reconsider its expectations. As a result, this will hurt the yellow metal.
Currently, the main scenario for gold is a return to the 1935-1950 range. Such a movement will be a sufficient correction before new attempts to consolidate above 2,000. Also, a slight decrease will help to move the lines of technical indicators even further from the overbought zone, and it will be very useful during the resumption of growth in gold prices.
We may offer you the following option of trading strategy:
Sell gold at the current price. Take profit 1 – 1950. Take profit 2 – 1935. Stop-loss – 2000.
Also, traders can use Trailing stop instead of fixed Stop-loss at their disposal.
This content is for informational purposes only and is not intended to be investing advice.