The gold price, shown in the chart above, experienced its worst week since February. The yellow metal lost almost 2% in price and fell to its lowest level since mid-March. At last, buyers took the initiative at the level of $1910 per ounce. Bulls tried to make a rebound in gold prices on Friday. And though they failed to keep the growth, they gave quite a clear signal to stop the downward movement of the last few days.
The decline in gold prices is mostly driven by the hawkish stance of central banks. Jerome Powell and other Fed officials were stating the need for additional interest rate hikes during the whole last week. At the same time, the cycle of monetary policy tightening was continued by the Bank of England, Swiss National Bank, and Norges Bank. Turkey's financial regulator was especially notable for raising its key rate from 8.5% to 15% at once. As a result, gold locally loses competition to bonds.
Either way, June's series of central bank meetings is over, and the subject will fade into the background until the second half of July. This might be a good opportunity to buy gold at much better prices than before. The yellow metal remains in demand, and many buyers were just waiting for lower prices to build up their long positions.
Gold's popularity can be explained by persistently high inflation in most countries. Claudio Borio, chief economist at the Bank for International Settlements, noted that core inflation is extremely stable. It is calculated without taking into account energy and food prices. In contrast to the general indicator, the core one is not declining that fast. The main reason is that people adapt to inflation and, in fact, begin to maintain higher prices by their own behavior.
The first growth target for gold now is 1940. Breaking through this level will open the way to the next one at 1960. The upside scenario is the main while gold prices hold above the 1900-1910 range.
The following trading strategy may be offered:
Buy gold in the range of 1920-1930. Take profit 1 – 1940. Take profit 2 – 1960. Stop loss – 1910.
This content is for informational purposes only and is not intended to be investing advice.
