Yesterday gold reached its global downside target. The ongoing monetary tightening by global central banks is doing its job. In addition, the U.S. economy is showing resilience. However, a correction to the round level of 1900 dollars per ounce was followed by a buyback. This was a signal that the current price range is significant. The news background remains negative for the yellow metal, so we assume one more attempt to test this level.
Some analysts support our view and predict further correction of the metal.
The resilient U.S. economy is forcing markets to reconsider the outlook for monetary policy in the second half of the year. In a recent report, Metals Focus, a leading precious metals consulting firm, analyzed how much lower gold could fall amid stronger economic data.
Given the current macroeconomic situation, the chances of a recession remain slim. This could put pressure on gold in the short term. The yellow metal could fall below $1,900 an ounce.
According to Metals Focus, technically gold could drop to $1,730 an ounce, about 10% below current levels. However, the annual average price for 2023 is likely to be $1,890.
There is long-term risk on the horizon that could put pressure on the gold price.
According to the Blackrock Investment Institute, developed countries may face permanently high interest rates in the future. This is due to an aging population.
Changing demographics mean a growing number of retirees in the U.K. and the U.S., while the working-age population is shrinking. This could upset the balance between supply and demand.
On Wednesday, the Bank of England Governor, Andrew Bailey, suggested that interest rates may stay high for longer, as the pace of price growth is not declining.
According to technical analysis, the price of gold was able to rebound from the $1,900 level yesterday. The 200-day moving average is also found there. There is a high probability that the price will be moving within a narrow range for some time. The upward momentum has faded, which means that the price will return to a corrective movement.
The level of $1900 will be the downside target. Stop-loss could be placed upon growth above the resistance formed during the last trading hours, which corresponds to the price of $1911.
A decline in the price of gold:
Take profit – 1900
Stop-loss – 1911
This content is for informational purposes only and is not intended to be investing advice.
