Positive statistics on the U.S. economy led gold to new lows

As it was expected in the previous forecast, there has been a serious fight between the buyers and sellers in the gold market for the level of 1,950. Yesterday the bears held the initiative, leading gold to the new local lows, with price temporarily falling below 1,940. Today bulls have been active, attempting to return the yellow metal’s price back to the level of 1,950 and higher. However, the news background is for the continuation of gold’s correction to 1,920.

Yesterday a lot of statistics on the U.S. economy were published. Quite unexpectedly almost all the indicators were better than forecasted. Both jobless claims, business climate assessments, as well as revised GDP data for the first quarter reflect the resilient state of the U.S. economy.

Consistently, the positive macrostatistics immediately increased the likelihood of the Fed’s interest rate hikes at the meeting on June 14. At the beginning of the week the likelihood of such a decision was estimated by market participants as less than 15%, while now it is already higher than 40%. Such change of expectations is in favor of the dollar’s strengthening and puts pressure on the commodity quotes denominated in American currency.

Gold demand might also fall if the situation with the U.S. debt ceiling is resolved. On Thursday, President Joe Biden and Head of Republicans in Congress Kevin McCarthy came close to an agreement to cut federal spending and raise the debt limit. If a compromise is reached, demand for safe-haven assets among financial market participants could fall significantly.

The outcome of today's trading in the gold market should be closely monitored. If the buyers do return the prices above the level of 1,950, the upward momentum might continue to 1,980. If it finishes the week below 1,950, the downside target of 1,920 will be more relevant.

The following trading strategy may be offered:

Sell gold at the end of today’s trading session below the level of 1,950. Take profit – 1,920. Stop loss – 1,980.

Traders may also use the Trailing stop instead of the fixed Stop loss at their discretion.