Gold price attempted to rise at the beginning of the week. This was supported by data on tightening of credit conditions in the United States. Meanwhile, companies' demand for credit is falling, increasing the chance of a recession in the near future. Bank officials expect this year to be difficult. There is a chance of gold price growth by the end of the year as economic data is getting worse.
The attention of market participants is focused on today’s Consumer Price Index (CPI) report.
The opinions on CPI report vary with any outcome resulting in higher gold prices. According to Andrew Schrage, executive director of Money Crashers, if CPI is positive, gold prices may reach new highs. This view is supported by FXTM's Lukman Otunuga. He stated that signs of cooling inflation could inject gold bulls with renewed confidence, propelling prices back toward this year’s high.
Investors appear overly optimistic about the future prospects for gold. In fact, if the inflation data are negative, it could bring gold down, as it did last Friday. Investors’ optimism can already be seen in the gold price, which gives a signal to open the short positions.
The gold price growth is limited by strong resistance of $2070, which is 3 years old. The probability of the breakthrough is still low, but a corrective movement might have many targets.
According to the technical analysis, the gold price has been moving sideways since April, excluding the short-term rise and fall on May 4. This dynamic will continue for some time until market participants are confident in beating inflation. As the price is close to the upper boundary, it is recommended to open the short positions.
The downside target is the local minimum at the level of $2,000. It is psychologically important for traders. A stop loss is placed at the breakout of the upper boundary, which is the level of $2050. At this level gold could test an all-time high.
Decrease in the price of gold:
Take profit — 2000
Stop-loss — 2050
This content is for informational purposes only and is not intended to be investing advice.