Gold continues its corrective movement This is happening against the expectations of most analysts, who bet on the growth of the metal because of debt ceiling problems in the U.S.
At the moment, the pressure of raising the debt limit in the United States results in a strengthening of the dollar, which sounds quite paradoxical. The currency of a country, which may default, is rising. Such dynamics is associated with the protective mechanism of the dollar. There are not many other options for investors to save capital. A strong dollar puts downward pressure on gold prices.
In addition, representatives of the U.S. Fed are making things worse. They are concerned that inflation is still resilient and that high rates will need to be held longer than expected.
Atlanta Federal Reserve Bank President Rafael Bostic and his Chicago counterpart Austan Goolsbee expressed optimism about the U.S. economy. According to their opinion, they will be able to achieve a "soft landing" for the U.S. economy.
According to Bostic, if regulators are wrong, officials will face serious problems. If there is a continuing high inflation and employment damage scenario, there will be enormous pressure on regulators. Bostic is sure that inflation can be reduced without a sharp rise in unemployment.
Statistics in the States confirm the strength of the economy at the moment.
U.S. sales rose by 0.4% in April. This data was better than the 1.0% drop in the previous month, but it was below the consensus forecast of 0.8%. According to analysts, the increase in sales in April indicates that higher rates by the Federal Reserve System and tighter credit conditions have not yet affected the U.S. consumer.
According to the technical analysis, gold continues to decline after renewing its all-time high at the beginning of May. Let this dynamic continue up to the 0.5 Fibonacci level from the entire growth wave since the last correction. The downside target corresponds to a price of $1,945. Stop-loss can be set at a growth above 0.236 Fibonacci at the level of $2020.
Decrease in the price of gold:
Take profit – 1945
Stop-loss – 2020