Since there are no new reasons for directional movement, gold prices are forming a sideways trend with an upper limit at the level of 2,000, whereas the support lies within the range of 1,940-1,950. This situation provides a good opportunity to gradually take a long position in the yellow metal at more favorable prices. A tactic of periodical purchases of gold at drawdowns now looks more reasonable than waiting for a confirmed breakout of the resistance at the level of 2,000 or a decrease to the local lows of late February and early March.
While there are no significant events in the calendar of important macroeconomic statistics, market participants have drawn their attention to statements of various representatives of the world financial regulators. Thus, Michael Barr, the U.S. Federal Reserve's head of banking supervision, delivered a speech yesterday. His comments were again reduced to a statement that the collapse of SVB and a number of other banks happened because of insufficient management, and these events allegedly will not affect the stability of the entire financial system.
Interestingly enough, gold prices reacted with growth to the reassuring statements of the officials yesterday, and not a decline, as one might have expected. Apparently, after the already manifested problems of the banking sector in the USA and Europe, investors expect new troubles to emerge in one way or another, the only question is their scale.
Edward Dowd, former portfolio manager at BlackRock, believes that the Fed will have to make an emergency rate cut due to the instability of the banking sector. The specialist expects the situation with SVB and Credit Suisse banks to reoccur repeatedly. If the Fed fails to take action, only 6 banks may remain in the U.S. banking sector. Monetary policy easing, as well as the status as a safe haven asset, will have a favorable impact on the gold price.
The most understandable trading strategy in the gold market now is buying into the drawdown within the area of 1,940-1,950 with the aim of increasing to the resistance level of 2,000. It is advisable to take profit there, because without a sharp change in the news background, a solid breakout above of the level of 2,000 seems unlikely.
The following trading strategy can be suggested:
Buy gold when it falls in the 1,940-1,950 range. Take profit 1 — 1,980. Take profit 2 — 1,990. Stop loss — 1,930.
This content is for informational purposes only and is not intended to be investing advice.