Gold quotes began Monday's trading with a drawdown, but the level of 1940 stopped the fall, and by the end of the day there was a price increase of 0.67%. On the daily gold chart, a flat line is forming gradually, with the lower boundary at 1940 and the upper boundary at 1980. The current week does not provide for a lot of important macroeconomic statistics, so in the short term gold may move inside the mentioned price range.
The day before the evening gold quotes' recovery was supported by the published U.S. PMI data. Statistics from the Institute for Supply Management (ISM) indicate a continued decline in the U.S. economy. According to the ISM, last month's purchasing managers' index (PMI) in the service sector fell to 50.3 from April's figure of 51.9. A minimum decrease to 51.8 was expected. U.S. service sector activity remained almost unchanged in May due to a slowdown in new orders.
According to Andrew Hunter, deputy chief economist at Capital Economics, the ISM data point to an approaching recession. Due to weak economic data, the U.S. Federal Reserve System may be forced to stop its interest rate hike cycle. As market participants believe, the probability of remaining unchanged interest rates by the Fed at next week's meeting on monetary policy is more than 75% by now.
As market analyst June Rong of IG noted, the future course of the Fed's monetary policy is closely connected to incoming economic data. Expectations about interest rates may continue to be subject of significant fluctuations. However, no dramatic changes are expected until next week, when the U.S. regulator will have a meeting and statistics on inflation for May will be published.
In the short term, gold prices may continue to fluctuate inside the current 1940-1980 range. Now there is a movement towards the upper boundary, which is possible to follow. The RSI indicator is recovering, supporting the current rise in gold prices.
The following trading strategy option can be suggested:
Buy gold in the 1955-1960 range. Take profit – 1980. Stop loss – 1940.
Also, traders may use Trailing stop instead of a fixed Stop loss at their convenience.
This content is for informational purposes only and is not intended to be investing advice.
