The gold price managed to rebound from the important level of $1,900 per ounce. The yellow metal was supported by weak U.S. economic data. The country’s June output fell to the lowest level since May 2020. Price pressure is easing as supply chain problems have abated significantly and higher borrowing costs have weakened demand.
However, negative factors for gold remain relevant.
According to the CME Fedwatch tool, investors estimate a nearly 90% chance of a 25-basis-point rate hike in July. Traders are now awaiting the release of the U.S. Federal Reserve's (Fed) June meeting minutes to get a clearer picture of its plans on interest rate hikes.
These plans are likely to be hawkish again, which will put pressure on the yellow metal.
Other analysts are also quite cautious about the current rebound in gold. By their estimates, the increase is expected to stop at current levels.
According to BMO Capital Markets analysts, a short-term rise in gold above $2,000 per ounce in mid-May could be its highest level this year. Markets continue to adjust to dynamically changing expectations for interest rates and a resilient U.S. economy.
In its quarterly outlook, the Canadian bank said it is keeping the average year-end gold price unchanged at $1,905 per ounce. As BMO Capital Markets experts stated, the precious metal is losing momentum as it has failed to hold above $2,000. These expectations suggest that the gold price will remain above the support level of $1,900 per ounce. Meanwhile, the resistance around $1,930 will stay unapproachable this year.
According to the technical analysis, the gold price on the hourly timeframe broke down the uptrend. The target of $1930 set by BMO Capital Markets has been reached. Now the development of a corrective wave is possible.
The downside target will be the 0.5 Fibonacci level of the whole wave of growth, which corresponds to the price of $1913. A stop-loss will be set at the updating of the last days high at $1931.
Gold prices are likely to decline:
Take profit – 1931
Stop-loss – 1913