Gold buyers are doubtful about the prospects of growth momentum

Gold prices, having updated the mid-March lows around 1930, started to grow. After Tuesday's upward momentum, buyers tried to continue the emerging movement yesterday, but by the end of the session almost all of the day's price gains were lost. Most market participants are probably satisfied with the upward rebound of gold and are fixing their profit, not counting on the quick return of prices to the level of historical maximums.

The previous day gold was supported by moderately dovish comments of the Fed representatives. The head of the Federal Reserve Bank of Philadelphia, Patrick Harker, said that leaving interest rates unchanged at the June 14 meeting would give the U.S. central bank more time to analyze the effects of an already executed tightening of monetary policy.

Fed Vice Chairman Philip Jefferson also spoke in favor of pausing the tightening cycle at the June meeting. According to him, changes in rate levels are often reflected by economic data with a time lag. Accordingly, the impact of past rate hikes has not yet fully affected inflation and the labor market. After assessing the Fed members' rhetoric, investors reduced the likelihood of monetary policy tightening in June from 60% to 35%.

However, tomorrow's labor market statistics for May will be the deciding factor in determining the June U.S. interest rate level. The unemployment rate is expected to rise slightly from 3.4% to 3.5% with the number of jobs created falling from 253,000 to 180,000. However, the job openings data released yesterday already cautions against overly optimistic expectations of a cooling labor market. If the U.S. economy proves once again that it is too resilient to interest rate hikes, gold will find it hard to avoid another drop.

The recent rebound has pushed back the 1920 level scenario to a later date. Nevertheless, as long as gold prices have not moved above the 1980 level, there is still a high probability of a new downside wave in the market. Recent lows below the 1940 level will be the nearest target.

Consider the following trading strategy:

Sell gold in the 1955–1965 range. Take profit – 1940. Stop loss – 1980.

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