Today, gold prices gained as much as 1.2%. Market participants brace for headwinds and volatility caused by the escalation of geopolitical tensions in the Middle East.
Last week, gold prices demonstrated a sharp intraday reversal. Previously, gold had declined below the level of 1810,45 amid the publication of monthly data on the labor market in the U.S.
The number of people employed in the non-agricultural sector rose by 336 000 and exceeded analysts’ forecasts of 227 000. The U.S. labor market continues putting pressure on gold and increases the chance of monetary policy tightening by the Federal Reserve System (Fed).
However, additional information in the report pointed to moderate wage growth in September. It slightly eased inflationary concerns and led to a decline in the dollar. Gold, on the contrary, began to grow.
The recent rise in yields has attracted the attention of several officials of the Fed. They say, if the growth continues, it will not be necessary to raise rates by 0.25% this year.
In addition, the rise in gold price was caused by the escalation of geopolitical tension in the Middle East. Gold’s role as a safe haven asset has increased again. Thus, the limiting factor for gold’s growth is the release of the minutes of the Federal Open Market Committee (FOMC) meeting and data on consumer inflation in the U.S. this week.
The September FOMC meeting minutes will be carefully analyzed in order to clarify the confidence in the monetary easing scenario presented in the forecasts of the Fed's top officials.
Gold prices are testing downtrend resistance on the H4 time frame.
From the point of view of wave analysis, the price has finished the formation of the third descending wave. The last wave has realized its full potential. The Relative Strength Index indicator (standard values) demonstrate divergence, confirming the change of direction, demonstrating divergence. The price consolidation above the resistance line may create conditions for the formation of a new upward wave chain.
The short-term outlook for Gold is to buy.
The target is at the level of 1915,00.
Part of the profit should be fixed near the level of 1880,00.
A Stop-loss should be placed at the level of 1795,00.
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.