The gold price fell below the most important support level. The week's closing price was at the lowest levels. The weekly decline turned out to be one of the most significant in recent years. Such dynamics are justified by fundamental factors.
According to Head of Global Macro at Tastylive Ilya Spivak, the U.S. data is getting softer and the Fed's pressure is showing itself in more areas. If this week's labor sector data is weak, gold could find support.
Meanwhile, Friday's data showed that core inflation in the U.S. slowed in August. At the same time, the core Personal Consumption Expenditure price index (PCE) has been approaching its 2% target over the past three months.
As FRB New York President John Williams said, the central bank may end interest rate hikes. This is indicated by the fact that inflation indicators are approaching the official target.
According to the CME FedWatch Tool, markets are estimating a 45% probability of another rate hike this year. There is also a 43% chance of some policy easing in the first half of 2024. The market is uncertain.
In the near term there is a risk of even greater decline in the metal price, as TD Securities analysts consider.
The recent active gold movement below the level of $1,900 was mostly driven by the Fed officials' statements. They reported about the continuation of the monetary policy tightening for a long period of time.
TD Securities experts said that based on the combination of the above-mentioned factors, the downtrend in gold has not been exhausted yet.
The market is slightly perplexed by the current economic situation, so traders can focus on technical indicators, which point to the fall in prices.
According to the technical analysis, the gold price broke through the main support. The decline may continue, as there are no opportunities for a rebound at the current level.
The downside target will be $1,810. There is support in the form of February's lows. A Stop-loss will be set at the return to the trend at the level of $1,870.
Gold prices are likely to decline:
Take profit – 1,810
Stop-loss – 1,870
This content is for informational purposes only and is not intended to be investing advice.
