Gold prices are nearing all-time highs at the range of 2070–2075. At the moment, the level of 2050 has been reached, and since the price rose to the upper boundary of the ascending channel, the upward trend could be broken for a short period of time. There are 2% left for the price to hit the target of historical maximum renewal. A significant correction of the gold price is going to be seen after it reaches the level of 2070.
Yesterday, the dollar index updated the last April’s minimum. That factor supports gold prices. The U.S. dollar reacted negatively to the PPI data release. The U.S. wholesale inflation declined 0.5% in March compared to February. On a year-on-year basis, producer inflation fell to 2.7%.
According to most analysts, the March inflation figures released this week support forecasts of the Fed's upcoming 25 basis point interest rate hike on May 3. The Fed will then pause its cycle of monetary tightening, which has become the most aggressive in more than 40 years. A pause in rate hiking will lower bond yields, continue to put pressure on the U.S. dollar, and push gold prices to new highs.
David Meger, director of metals trading at High Ridge Futures, believes the current situation is positive for gold, because the cycle of monetary tightening may end with inflation remaining at a much higher level than Fed officials would like it to be. Investors’ concerns about recession and possible worsening of the banking crisis also play in favor of the main precious metal.
When the price reached the level of 2050, there was a small pullback, but it is unlikely that the gold price will fall below the level of 2020. The RSI indicator hasn’t entered the overbought zone yet, so there are no technical obstacles for the price to move within the upward channel.
The following trading strategy can be suggested:
Buy gold in the range of 2020–2035. Take profit — 2070. Stop loss — 2000.
Traders can 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.