Midterm trend supports gold prices

Gold quotes started 2024 with a correction. Prices were falling until they found support on the medium-term uptrend line from the November lows. Below the level of 2030 dollars per ounce, buyers increased their activity, and as a result, the price bounced upwards. The nearest target for the bulls might be the highs of late December, located near the level of 2080.

Several factors contributed to the upward momentum of gold prices on Friday. Another escalation of tensions in the Middle East increased demand for safe haven assets, including gold. It is also favored by new economic data from the U.S., indicating a decline in producer prices. This statistic compensated a negative effect from growth of consumer prices, which was announced on Thursday.

The U.S. Department of Labor reported a negative trend in producer inflation in December. Prices fell by 0.1%, with the November figures revised from a zero change to a similar drop. Analysts' consensus forecast called for a monthly inflation rate of 0.1%. In annual terms, price growth in the U.S. production sector accelerated from 0.8% to 1%, but traders did not attach much importance to this.

Bill Adams, chief economist at Comerica Bank, notes the risk of a new wave of price increases due to events in the Middle East. Disruptions in supplies of goods, primarily energy, might indeed accelerate inflation again. However, the impact on the U.S. companies will be limited, as they are much better supplied with oil and gas than European and East Asian companies. For gold, this means support both from normalization of price growth rates and from its status as a safe haven asset in a period of heightened geopolitical tensions.

By the end of Friday's trading session, the bulls lost almost half of their achievements, but today the growth of the gold price resumed, reducing the risk of a local correction. As long as the price is above the level of 2045, the main scenario is the continuation of the current movement to the level of 2080.

The following trading strategy may be offered:

Buy gold in the range of 2045–2055. Take profit – 2080. Stop-loss – 2030.

Also, traders can use a Trailing Stop instead of a fixed Stop-loss at their discretion.