Gold is consolidating at new trading levels after declining last week. The Fed regulator remains confident in its strategy of monetary policy tightening. This week there may be another confirmation of that rhetoric, which could have a negative impact on gold prices. Investors are worsening their forecasts for the Fed interest rate every week. This fact cannot be ignored by gold.
A number of economic data are expected to be released this week, including a key indicator for inflation, information on orders for durable goods and the University of Michigan Consumer Sentiment Index. In addition, U.S. Central Bank Chairman Jerome Powell may provide some clarity in his speech on the Fed's future rate level in the middle of the week.
Earlier this week, John Williams, president of the Federal Reserve Bank in New York, emphasized the importance of restoring price stability. At the same time, he believes that monetary tightening may lead to negative economic consequences.
Now, investors are expecting a rate hike in July with a 74% chance, and rate cuts are expected to start in 2024.
The fight against inflation really is not over yet. This fact is confirmed by economists.
Risks of continued high inflation have risen despite falling prices in many countries around the world. This statement was made to German newspaper FAZ by Claudio Borio, chief economist at the Bank for International Settlements.
The analyst pointed to the stability of core inflation. It is calculated without taking into account fluctuations in energy and food prices. Keeping it at a high level makes it difficult to continue fighting against rising prices in the world.
One of the reasons for this effect is that people adapt their behavior to high inflation because of its long-term effect on the economy.
According to the technical analysis, the price of gold is approaching the resistance level, which previously was a support. Most likely, it will be a reversal of quotes, because the fundamental drivers are not favorable to further growth at the moment.
In that case, the local minimum, which corresponds the price of $1912, will be the downside target. Stop-loss can be set at a breakdown of this resistance and at a renewal of the last days highs at 1940 dollars.
Decrease in the price of gold:
Take profit – 1912
Stop-loss – 1940