Gold traded near a one-week low on Thursday after five consecutive sessions of declines. At the same time the dollar is holding near highs since mid-March as new data yesterday showed unexpected growth in the US services sector in August. This indicates a continued inflationary pressure.
Federal Reserve Bank of Boston President Susan Collins said Wednesday that while there are signs of progress in cooling inflation, now is a time for the central bank to proceed carefully when it comes to its next monetary policy steps.
Higher US interest rates increase the opportunity cost of holding gold, which does not generate interest income.
Meanwhile, European Central Bank board members have warned investors of a possible rate hike next week.
But at the same time, governor Andrew Bailey noted on Wednesday that the central bank is "much nearer" to ending its run of interest rates increases.
Meanwhile, policymakers expect China's economic growth to slow. It may be even more pronounced than it was previously predicted. This is due to the country's transition from an infrastructure investment economy to a consumer economy. This process is considered complex.
A combination of fundamental factors reduces the attractiveness of the yellow metal. In August, investors withdrew funds from gold ETFs for the third month in a row. According to the World Gold Council (WGC), the liquidity outflow amounted to $2.9 billion, which corresponds to 46 tons of the precious metal.
The gold price on the daily timeframe chart shows the formation of a broad correction. Macroeconomic factors of the current week have already been taken into account by market participants, so the multidirectional movement of the precious metal price may be seen again in the near future.
In terms of wave analysis, the price is forming the second descending wave on the H4 timeframe.
The Stochastic Oscillator moving indicators (standard values) have entered the oversold zone, which signals the possibility of price increase. This may create conditions for a change in the current trend and the beginning of the third upward wave.
GOLD’s short-term outlook is to buy.
The target is at the level of 1965.00.
Part of the profit should be fixed near the level of 1935.00.
A Stop-loss should be placed near the level of 1885.00.
The bullish trend is of a short-term nature, so it is suggested to limit the trading volume to no more than 2% of your capital.