Yesterday gold prices attempted to rise to 2050 dollars per ounce. However, the resistance level was not broken, and market participants started to sell gold. As a result the trading session on Wednesday closed with losses of 0.2%. Today the price is consolidating around the level of 2030, however the "bulls" are likely to stimulate another wave of rise in gold prices.
Yesterday's release of the inflation data in the U.S. was almost completely in line with forecasts. The consumer price index rose 0.4% for the month and fell slightly from 5% to 4.9% from a year ago. Some traders interpreted the released statistics as another factor in favor of rising gold prices, but the indicator’s deviation of only 0.1% from the expected level is obviously not enough to renew the historical highs.
The current pause in the rise in gold prices may become a profitable opportunity for increasing investments in gold. According to the World Gold Council (WGC), despite the high level of demand for gold in the 1QY, buyers prefer to conduct transactions during the drawdowns or flats, rather than at maximum price levels. The current market condition provides such an opportunity.
The WGC report also showed an increase in gold purchases by exchange-traded funds (ETFs). Global gold ETFs saw 15 tons worth $824 million inflows in April. This is the second consecutive month that gold ETFs have seen inflows. The WGC expects investment demand to be stable through 2023 due to increasing liquidity in the gold market compared to other markets.
The current drawdown of gold could be used for building up long positions in this precious metal. While the range 2005–2015 retains the status of strong support, the price of gold will attempt to continue growth above the level of 2050.
The following trading strategy can be suggested:
Buy gold in the range of 2015–2025. Take profit — 2050. Stop loss — 2005.
Traders can also use Trailing stop instead of fixed Stop loss at their discretion.