On Thursday, the gold quotations showed the strongest daily decline since the end of June. The price of the metal decreased by almost 1.5%, once again approaching the important level of 1940. It couldn't pass this support immediately, but the deteriorating news background indicates that bears will try to continue their downward movement once again. If the level of 1940 is broken through, the way to the level of 1900 will be opened.
Yesterday's statistics on the US economy contributed to the negative dynamics of gold prices. According to the initial assessment, GDP in the second quarter grew by 2.4%, with a forecast of only 1.8%. In turn, the weekly number of jobless claims fell to spring lows. The US economy shows its resilience once again, but as for gold, this is not something to celebrate.
Following the results of the last meeting of the Fed, Jerome Powell gave no forecasts about the future of monetary policy. According to him, the next steps of the Fed depend entirely on the incoming economic data. Such data as yesterday's figures on GDP and unemployment benefits may incline the US regulator to even higher rates in the fall. Additionally, today's Personal Consumption Expenditures Price Index (PCE) statistics may reinforce such expectations. If the PCE inflation rate is higher than expected, the downward dynamics of gold will intensify.
A recent survey of market participants conducted by Reuters confirms the no expectations of a significant rise in gold prices. Traders forecast the average cost of the metal of 1950 dollars per ounce for the third quarter of this year. Deterioration of expectations contributed to the hawkish comments of Fed officials and other central banks. Investors choose bonds over gold with its zero percent yield in a high-interest rate environment.
The RSI indicator continues to bounce down from the overbought zone, confirming the signal for a decline in gold prices. The nearest target of the sellers of the metal is the level of 1940. Probably, a fierce struggle for this support will unfold as it was in the period of May-June.
We may offer you the following option of trading strategy:
Sell gold at the current price. Take profit — 1940. Stop-loss — 1960.
Also, traders can use Trailing stop instead of fixed Stop-loss at their disposal.