Gold quotations continue their corrective movement, having overcome the level of 2000 dollars per ounce from up to down. Now the price has fallen to the support level of 1980, which successfully restrained all attempts of bears to seize initiative during April. Technical indicators are approaching the oversold, increasing the likelihood of soon buyers’ activity in the gold market.
On Wednesday, U.S. President Joe Biden and leading Republican congressman Kevin McCarthy underscored their determination to reach an agreement to raise the American debt ceiling soon. These remarks eased fears of a possible default, leading to a surge in demand for risky assets and a concomitant weakening of gold prices.
According to Edward Meir, a metal analyst at Marex, gold could be within a range of $1965 to $2020 over the next two weeks. He said that demand for the yellow metal remains weak locally, as rising optimism about the U.S. debt ceiling is likely to make gold less attractive as a safe-haven asset. Growing expectations of a June interest rate hike by the Fed is also weighing on gold, Meir added.
Ole Hansen, head of commodity strategy at Saxo Bank, assesses the current pullback in gold prices as a normal correction in an uptrend. The drawdown is mainly due to the operations of hedge funds. Since early March, they bought more than 122 thousand contracts on gold, and the current decrease in price causes liquidation of long positions. At the same time, the sales don’t mean a sharp deterioration in market sentiment because such a strategy is mandatory for hedge funds due to the strict rules of risk management.
At the same time, investors are focused on the long-term perspective and use ETFs for investing in gold and don’t tend to sell. Therefore, in case the support of 1980 remains with the bulls, we could see a quick upward bounce of the price. The levels of 2005 and 2015 will be the growth targets.
We may offer you the following option of trading strategy:
Buy gold in the range of 1975 – 1985. Take profit 1 — 2005. Take profit 2 — 2015. Stop-loss — 1950.
This content is for informational purposes only and is not intended to be investing advice.