Gold prices are still declining. The key level of 1900 has failed to stop the bears. They took the yellow metal prices to their lowest levels since mid-March. However, the downward movement doesn’t seem to accelerate. Instead, long upper shadows of candlesticks on the daily chart confirm that gold buyers are actively seizing the initiative. By the end of the week a favorable situation for a rebound in gold may develop.
In the coming days, the activity of traders and investors is likely to stay low. The main events of the week will take place towards the weekend. On Thursday, the annual symposium of the Federal Reserve and representatives of the world's leading central banks will begin in Jackson Hole. In terms of importance this event is on par with, and sometimes even exceeds the meetings of the American regulator.
First of all, market participants are waiting for the speech of the head of the Fed Jerome Powell, which will be held on Friday. Powell is expected to comment on further dynamics of interest rates in the United States. The future of monetary policy now plays a key role in understanding the prospects of gold and other precious metals.
At the moment, the yellow metal is not popular due to high bond yields and reduced fears of recession. Demand for gold from the population of Asian countries is also suppressed. However, analysts of Commerzbank note the high chances of the metal to restore its lost positions in the near future.
As believed by Commerzbank officials, Jerome Powell and other representatives of the Federal Reserve will not talk of high probability of interest rate hike in the Fall. Thus, the current rate range of 5.25-5.5% is the peak in the monetary tightening cycle. As soon as the markets get enough confirmation of this fact, gold prices will immediately begin to recover.
Technically, gold is also likely to rebound upwards. The RSI indicator reflects the strongest oversold condition of the yellow metal since July last year. The first target of an upward movement will be the level of 1910.
Consider the following trading strategy:
Buy gold at the current price. Take profit – 1910. Stop loss – 1870.
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.
