Gold sell

The main downside target for gold has not yet been reached

30 May 2023 169
The main downside target for gold has not yet been reached

Gold is maintaining its downward trend. Today the price broke through the support level, which was forming during the last three trading sessions. There are enough reasons for such dynamics: uncertainty about further changes of the key rate, the U.S. national debt issue, growing dollar index, and the U.S. economic strength.

 

According to a report from TD Securities economists, gold prices will remain under pressure due to persistent inflation and relatively strong U.S. economic data.

Consumer prices remain high, diverging from expectations of the U.S. Federal Reserve (Fed) and causing concern in the market. As a result, gold may drop and reach support around $1,900 an ounce.

Bart Melek, head of commodity strategy at TD Securities, notes that strong macroeconomic data have put pressure on gold. Durable goods orders, personal consumption expenditures and consumer price index exceeded analysts' expectations.

 

Most analysts' rate expectations have turned negative.

According to Alasdair MacLeod, head of research at Goldmoney, regardless of the U.S. Federal Reserve's (Fed) decision at the next meeting in June, lending will shrink. Business conditions will tighten. Slower economic growth in the country is causing a decline in sales, and companies are being forced to borrow.

Credit demand is rising, so interest rates should naturally go up. The Fed's options are limited, according to Goldmoney. In this regard, the financing of the U.S. national debt will be much more difficult.

 

According to the technical analysis, gold is likely to update the local lows. Today the price broke through the 0.5 Fibonacci level from the last growth wave, which acted as a support line.

The downside target may be the next Fibonacci level of 0.618. It is equal to the price of $1910. A stop-loss could be placed upon returning above the level of 0.5 and breaking the downtrend. A stop will be around $1,950.

 

A decline in the gold price:

Take profit - 1910

Stop-loss - 1950

This content is for informational purposes only and is not intended to be investing advice.

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