Gold prices continued the positive dynamics of Friday at the start of the week. On Tuesday morning, the price was approaching the level of 1940, but the bulls still do not have enough strength to test it. Most likely, market participants will not break the current consolidation of gold prices in the range of 1910-1940 today. All attention is now focused on Wednesday's events, which can seriously change the balance of power in the gold market.
Tomorrow's release of updated statistics on consumer inflation may significantly affect the trajectory of the Federal Reserve's monetary policy. According to the poll conducted by Reuters, the core consumer price index rose 0.3% month-on-month in June. If the actual inflation rate turns out to be higher than expected, it could lead to additional tightening of the Fed's policy and reduce the attractiveness of gold.
A number of data from the recent labor market report points to such a scenario. In particular, it is worth paying attention to the growth rate of wages, which remained at the May level of 4.4% in June. Such stability of the labor market is clearly not contributing to the decline in inflation to the Fed's 2% target. Speaking yesterday, representatives of the U.S. regulator confirmed their intentions to vote for a rate hike at the July 26 meeting.
Negative statistics on inflation in the U.S. may push gold prices back to the level of 1910. A deeper dive with another test of the 1900 level is not ruled out. However, sellers should be careful, because the bulls' activity is clearly visible at such low levels, building up their long positions during strong drawdowns in the price of yellow metal. Thus, last week the net long position in gold increased by 15% to 99 thousand contracts.
The strategy of selling gold in the range of 1925-1935 looks interesting. The goal will be to reach the 1910 mark. The scenario remains valid as long as the price is below the level of 1950.
Consider the following trading strategy:
Sell gold in the 1925-1935 range. Take profit – 1910. Stop loss – 1950.
Traders may also use a Trailing stop instead of a fixed Stop loss at their discretion
This content is for informational purposes only and is not intended to be investing advice.
