The gold price showed a rapid growth during Tuesday's trading session. Similar dynamics was observed last week. Such movement was driven by weak economic data in the U.S. and lower inflation in Canada. After a surge of positivity, a correction wave may be expected.
Data on U.S. retail sales for June, published earlier, were below experts' forecasts. The index’s fall had a negative impact on treasury bond yields and the U.S. dollar exchange rate.
Although the volume of retail sales in the country did not meet traders' expectations, core consumer spending turned out to be rather high due to the tight labor market.
Investors are putting more bets on a pause in the Federal Reserve's (Fed) monetary policy tightening cycle, thereby weighing on the dollar.
According to the CME FedWatch tool, the probability of a rate hike at the regulator's next meeting on July 25–26 is 99%. At the same time, the market predicts further rate cuts, starting from the middle of 2024.
The fundamental reason for the corrective wave is generally not required. However, there are some negative factors for the metal.
Commerzbank analysts focus on the recent measures of Indian and Chinese governments to limit gold imports. These actions have already led to new highs in gold prices in rupees and yuan.
China's domestic gold prices exceed the global quotes already by $19 per ounce. The difference may soon reach the 6-year high, set last September. Back then, the premium hit the level of $25 per ounce. As a result, weaker summer demand for the yellow metal in China may decline even further.
According to the technical analysis, the gold price is moving in an uptrend. Yesterday its upper limit was reached, and now the correction wave to the support level is possible.
The downside target will be the level of $1,967. The lower trend line is located near it, as well as the consolidation level in the middle of June. A Stop-loss will be set when the metal price rises to $1,980. It is located just above the highs of today's trading candlestick.
Gold prices are likely to decline:
Take profit – 1,967
Stop-loss – 1,980