Buyers keep gold above 2000

In the second half of the last week, gold quotations were under pressure from sellers. On Friday, an important level of $2000 per ounce was tested, and the price managed to rest above this support at the end of trades. Bulls are still determined to buy out strong drawdowns of gold quotations, therefore, 2000 level support might rebound upwards.

The main culprit for the local weakness of gold is the sharp rise in the dollar index to a one-month high. There is a widening contradiction between official Fed documents signaling a June pause in the monetary cycle and individual officials calling for further rate hikes in their speeches. On Friday, the trend was supported by U.S. financial regulator spokeswoman Michelle Bowman.

Bowman said that additional monetary policy tightening is possible. According to her, a higher level of rates would be appropriate if inflation remains robust and the labor market is tight. Bowman also expects the rate to remain high for a long time. It is very difficult for gold market participants to be certain about the end of the Fed's tightening cycle when officials make such comments.

However, it is necessary to keep in mind that the next Fed meeting is still a month away, and the probable U.S. default and its debt obligations remain in the limelight. Despite this outcome being highly unlikely, RBC Capital Markets' specialists see prerequisites for gold growth in this backdrop. According to them, even if an agreement to raise the debt ceiling is reached, the anxiety of market participants will increase, and gold looks like the best instrument to hedge soon.

2030 might be the first growth target for a bounce from a support level of 2000. In case of success, gold quotes might head toward 2040. The likelihood of such an outcome will significantly increase in case of new unsuccessful negotiations to raise the U.S. debt ceiling.

We may offer you the following option of trading strategy: 

Buy gold in the range of 2010 – 2015. Take profit 1 — 2030. Take profit 2 — 2040. Stop-loss — 2000.

Also, traders can use Trailing stop instead of fixed Stop-loss at their disposal.