Concerns related to the further spread of the banking crisis are the main driver of a recent increase in gold demand. This growth factor of the metal weakened after regulators took measures to stop the crisis. Such a situation in the short term creates a further corrective movement in gold.
The outlook for the precious metal remains positive from the long-term investing point of view. The banking crisis has just begun, and regulators have closed local problems. However, global dynamics remain negative for the economy. The Fed increases the rates at a record pace in decades, and this already shows in economic data. As a result, the regulator will have to lower the rate again and start money printing to solve new, more global problems in the economy. This scenario is quite positive for gold, which is likely to renew its all-time high this year.
According to the Commerzbank economists' forecast, gold prices may again come under pressure, as the market will be forced to adjust its expectations on the rate.
Now, many are committed to easing the monetary policy of the US Federal Reserve System until the end of this year. This forecast supports the rise in gold prices. However, Commerzbank experts believe that the market will have to reconsider its expectations. As a result, this will hurt the yellow metal.
Expectations for the Fed rate may change with the publication of statistics that will reflect the growth of the economy or high inflation. Of course, this will happen if the current acute phase of the banking crisis has receded into the background.
According to technical analysis, the price of gold hasn’t yet reached the first Fibonacci correction level from the entire growth wave. There is also the opening of a powerful bullish Marubozu candlestick, which formed during the acute phase of the banking crisis. A break below this level will be a bearish signal, so the price will most likely bounce up at this level. Currently, it is better to open short positions in gold.
The target of the decline will be the level described above; it corresponds to the price of $1925. We will set a stop-loss when the bullish movement resumes, namely, if growth exceeds yesterday's highs. This is the level of $1980.
Decrease in gold price:
Take profit — 1925
Stop-loss — 1980
This content is for informational purposes only and is not intended to be investing advice.
