Gold prices are slowly rebounding after falling below 1900. Even with the negative news background, the current level looks attractive for many market participants. A lot of investors have been waiting for the moment to buy the yellow metal since early spring, and now they finally had an opportunity to build up long positions at more favorable prices.
The rebound in gold prices was primarily supported by Friday's statistics on inflation in the U.S., which showed a slowdown in price growth. Additional support came from business activity data yesterday. The manufacturing PMI declined from 46.9 to 46 in June against the expected rise to 47.2. U.S. manufacturing activity slowed to its lowest level since May 2020.
An even more positive sign for gold were manufacturing inflation data. The corresponding index fell from 44.2 to 41.8 at once, with expectations of a much more modest correction to 44. Industrial price pressures are easing: supply chain problems have mostly been resolved, and higher lending rates have dampened demand.
Declined gold prices are gradually reviving demand from Asian buyers of precious metals. Thus, Metal Focus analysts expect a rise in gold consumption by the Indian population. Spring’s jump in the yellow metal’s prices caught many of India's market participants by surprise, as they did not attempt to make new purchases and took a wait-and-see attitude.
The fall in prices in recent weeks might stimulate an increase in gold buying. Metal Focus representatives forecast a rise in gold demand in India closer to the wedding season starting in August.
From the technical point of view, the RSI indicator moved closer to the oversold zone and turned upward, confirming a buy signal for gold. The nearest bullish target will be 1940. This level kept the price from further decline for almost a month, and now might be resistance.
The following trading strategy may be offered:
Buy gold for the current price. Take profit – 1940. Stop loss – 1900.
Traders may also use the Trailing stop instead of the fixed Stop loss at their discretion.