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High inflation in the US may cause a rally of gold

12 July 2023 202
High inflation in the US may cause a rally of gold

The gold price has formed a rising momentum. The main resistance levels have been overcome. Now there is an opportunity for the acceleration of an uptrend. Investors are waiting for the publication of the US inflation data. In recent months, this data was positive for the holders of gold. The Federal Reserve's signals of monetary policy tightening put pressure on the gold price.

Economists polled by Reuters expect the inflation rate to fall to 3.1% from 4%. That would be the lowest figure since March 2021. The core rate could also fall to 5% from 5.3%. However, this is still well above the central bank's target of 2%.

Markets see a 92% chance of July 26 rate hike by 25 basis points, according to the CME Fedwatch Tool.

Low inflation could reverse market expectations for Fed policy tightening.


Analysts remain bullish on gold by the end of the year.

Nicky Shiels, head of metals strategy at MKS PAMP, said that she is maintaining her 2023 year-end price average of $1,930 an ounce. However, prices could remain in a downtrend in the near term.

MKS sees gold prices trading in a range between $1,850 and $2,100 an ounce through the second half of the year. Volatility is expected to last for the next 6 months as monetary policy continues to tighten. 

Nevertheless, the expert believes that the gold price will reach a new all-time high by the end of the year and will exceed $2,100 per ounce. Shils says that the Fed won’t lose the inflation fight or break something more substantial in the US economy.

According to the technical analysis, the price of gold may rise in the near future. The uptrend was broken a few days ago. Today there was an attempt of a breakout from the rectangle. There might be a breakout of a resistance level and a rise in prices.

The growth target will be the level of 0.382 Fibonacci from the whole wave of growth from the beginning of the year. It corresponds to the price of $1970. A Stop loss should be placed at the return to the lower boundary of the rectangle and at 0.618 Fibonacci at the level of $1910.

Gold price growth:

Take profit — 1970

Stop-loss — 1910

This content is for informational purposes only and is not intended to be investing advice.

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