Gold prices experienced a very volatile week. At the very beginning of the week, gold prices set a new all-time high, but it failed to build on the success. Bulls hurried to fix profits, provoking a sharp downward pullback in prices. By Friday evening the price returned to the level of $2000 per ounce, where it continues to be on trades to Monday morning. At the same time, the correction of gold still has the potential to continue.
The statistics on the U.S. labor market for November, published on Friday, contributed to cool the fervor of gold buyers. Both the growth in the number of new jobs and the unemployment rate were better than analysts' expectations. If tomorrow's inflation report will be released in the same vein, we should expect Jerome Powell and his colleagues from the Fed to use harsh rhetoric at the end of the meeting on 13 December. Such a development will increase pressure on gold prices.
Negative signals are also coming from the physical market of precious metals. According to Reuters, Asian traders are forced to reduce gold prices due to falling consumer demand. Thus, dealers in India offer gold with a discount of $14 per ounce compared to world prices. A week earlier, a discount was $9 per ounce. Traders from Mumbai record not only a decrease in demand, but also an increase in sales of gold products by the population.
In the Chinese market, gold is historically traded with a premium to global prices, but even here the deterioration of sentiment is noticeable. By the current moment price premiums have decreased to the range of $12–30 per ounce of gold, a week earlier they were at the levels of $25–35. Traders in Hong Kong, Singapore and Japan are also fixing lower premiums in local gold prices. The population of Asian countries is not ready to buy gold at such high prices.
After consolidating below the level of 2000, gold price will head towards the next target at the level of 1980. The end point of the current correction could be 1940, especially in case of hawkish signals from the Fed and other central banks.
The following trading strategy might be suggested:
Sell gold at the current price. Take profit – 1980. Stop-loss – 2015.
This content is for informational purposes only and is not intended to be investing advice.
