This week the gold market is waiting for the meetings of the Federal Reserve, the Bank of England and the Bank of Japan. Comments from the regulators regarding monetary policy are very important for investors.
In recent weeks, the U.S. economy reaffirmed its stability. At the same time, inflation is gaining momentum. This is putting pressure on the gold market.
Analysts have tightened their forecasts ahead of the meeting, and now expect a prolonged period of tight monetary policy.
According to economists surveyed by Bloomberg News, a resilient U.S. economy will encourage the regulator to raise interest rates again this year. After that, borrowing costs will remain at their peak for longer than expected.
The Fed will keep the rate in a range of 5.25% to 5.5% at its meeting on September 19–20. It will remain at that level until the first cut next May. In July, economists projected the start of monetary policy easing in March 2024.
Rapid economic growth, low inflation and stable labor market have created prerequisites for the Federal Reserve officials to update their forecasts. This may affect the prospects of easing the monetary policy. It was said by the chief market analyst from KCM Trade, Tim Waterer.
Meanwhile, over the weekend, TD Securities noted that the growing belief in the avoidance of recession and the expectation of continued high interest rates cooled investors’ interest in precious metals. Optimistic data on the Consumer Price Index (CPI) and retail sales only reinforced this trend.
The latest inflation data may lead to more hawkish comments from the regulator. In the coming days, traders can build this risk into gold prices. The Fed is unlikely to ignore the latest economic data.
According to the technical analysis, the price of gold has risen to the resistance in the form of the upper boundary of the downtrend. It is likely to fall back from here. Positive comments from the Fed may change the situation. However, we do not expect them at Wednesday's meeting.
The downside target may be the support level at $1.902. Stop-loss will be set in case of the resistance breakdown and quotes growth up to $1.950.
Gold prices are likely to decline:
Take profit – 1 902
Stop-loss – 1 950