Yesterday gold prices attempted to break through the lower limit of the flat range. Such dynamics of the metal were assumed in the last forecast. The downtrend may be confirmed today, as all attention will be on Fed Chair's comments. The regulator is likely to remain hawkish. As it was last week after the Fed meeting.
Powell will present his semi-annual report on monetary policy to the U.S. House of Representatives Committee on Financial Affairs at 14:00 GMT. Market participants will closely monitor the central bank's position on further interest rate hikes in light of tough statements from board members.
Two Fed officials said on Tuesday that their focus remains on reducing inflation that is too high.
According to the CME FedWatch tool, traders now estimate the probability of the regulator’s rate hikes in July at 78%.
But not only central bank actions affect gold. There is also physical demand for the metal. In recent months, many regulators and individuals have been buying up gold, thereby boosting the price. However, this cannot continue indefinitely. The first signals of a slowdown in purchases came from China.
A sharp increase in gold buying by people in China, triggered by delayed demand after three years of Covid-19 restrictions and optimism about a rapid economic recovery, is beginning to slow down.
People in China are now quite cautious about spending cash amid economic uncertainty, said Jiang Shu, an expert at Shanghai Shandong Gold Industrial Development Co. According to him, a surge in purchases may no longer occur without a decline in the yellow metal prices.
According to the technical analysis, the gold price broke through the lower limit of the flat trend. In case of consolidating at this level today, the fall could continue by the rectangle size. The downside target then will be the $1,900 level. The 200-day moving average as support is also located there. A stop-loss will be placed at rising above $1,950. In this case the flat scenario remains, and the current decline was a false exit.
Gold prices are likely to decline:
Take profit – 1900
Stop-loss – 1950
This content is for informational purposes only and is not intended to be investing advice.
