The gold price attempted to recover amid weak economic data in the U.S. A rebound from the local lows was weak. It failed to break through the upper limit of the flat movement.
The latest U.S. manufacturing PMI data signal a weakening of the sector. It declined to 48.5 points, according to S&P Global Flash US Composite PMI. Market participants expected 50 points.
The services sector rose to 55.1 points. The market forecast suggested the rise to 52.6 points.
Gold was supported by the weak manufacturing sector. However, the growth of the services sector increases inflation risks, so the situation looks double-edged.
Today inflation data in the U.K. have been published. They were worse than the outlook. The consumer price index was 8.7% in April, higher than any of 36 economists' estimates or the central bank's forecast of 8.4%. Core prices excluding food, energy and tobacco rose to 6.8% last month from 6.2% in March. According to analysts, inflation was more persistent than the Bank of England had expected. As a result, the regulator will have to raise interest rates from 4.50% to 4.75% in June and possibly will continue hikes in the upcoming months.
All these factors have a negative impact on precious metals. The rate will peak at a higher level. It will hold at this level longer than forecast. Previously, the Bank of England has expressed its concern about inflation persistence even after a sharp drop in energy prices. This is just what we are observing in the U.K. economy.
According to the technical analysis, the gold price continues to trade within the flat trend on the hourly timeframe. Now the prices are closer to the upper limit, so it is reasonable to open short positions. Moreover, the latest statistics are negative for gold.
The downside target will be the metal’s local lows at $1,955. A Stop-loss will be set at exiting the flat through the upper limit at $1,985.
Gold prices are likely to decline:
Take profit – 1,955
Stop-loss – 1,985
This content is for informational purposes only and is not intended to be investing advice.