Gold prices continue to stay in a sideways position between 1940 and 1980. On Wednesday, there was an attempt to exit this range downward, but it was not successful. The very next day, all the losses were recovered, and a "bullish engulfing" pattern was formed on the daily chart of gold. A quick drawdown buyback could inspire the bulls and push the price towards the 1980 level.
There were no other significant news on Thursday, so the attention of market participants was turned to the weekly statistics on jobless claims in the U.S. The data were worse than expected, the number of initial applications exceeded the 260,000 level for only the second time during the last year. The U.S. labor market continues to cool gradually.
According to Tim Waterer, chief analyst at KCM Trade, the initial jobless claims data provided additional support for the Fed's pause at its meeting on June 14. The subsequent decline in bond yields allowed gold prices to move higher. After the correction in May, gold is consolidating and waiting for a new directional movement.
Ole Hansen, head of commodities strategy at Saxo Bank, connects the pause in the upward trend of gold prices with the review of expectations on interest rates. Now, market participants expect the Fed rate to be 5% by the end of the year, although only a month ago it was expected that monetary policy would soften much more quickly - to 4% by December. According to Hansen, a sharp slowdown in U.S. economic growth will lead to the end of discussions about additional rate hikes. That would also open possibilities for pushing gold prices to a new record maximum.
There will be no important macroeconomic statistics released today or on Monday. Therefore, the probability of a continued flat trend in gold prices is pretty high. The confident buyback of the drawdown, which happened yesterday, indicates good chances of the price movement to the upper boundary of the range at the level of 1980.
The following trading strategy option can be suggested:
Buy gold around the 1960 level. Take profit – 1980. Stop loss – 1940.
This content is for informational purposes only and is not intended to be investing advice.
