Gold prices reached their highest levels since the beginning of December last week. The price returned above the level of 2050, and during the trading session on Friday, the bulls actively tested the resistance of 2070. The attempt was unsuccessful, but at the end of the day, the increase in the price of yellow metal was still recorded. The rise in prices may continue after traders return from the holiday weekend.
Before leaving for the long weekend, the U.S. statistical agencies presented a large package of economic data. Almost all published figures reflected the continuing cooling of the U.S. economy. The dynamics of home sales was much worse than expected, the value of 590 thousand is the lowest in more than a year. The forecast on the U.S. GDP growth for the 4th quarter from the Atlanta Fed, which was significantly adjusted from 2.7% to 2.3%, also draws attention.
However, the biggest impact on the gold price came from the release of the Personal Consumption Expenditure (PCE) price index for November. Growth in the Fed's favorite inflation indicator slowed from 2.9% to 2.6%, significantly beating analysts' forecast of 2.8%. Sal Guatieri, senior economist at BMO Capital Markets, notes better PCE dynamics than any Fed member's expectations for 2023. The U.S. regulator is now ready to ease its monetary policy, although the timing remains hotly debated.
According to analysts at the World Gold Council (WGC), even if interest rates remain high in the U.S. and other countries, the yellow metal will continue to be in demand. WGC representatives emphasize the high degree of geopolitical tensions, as well as the purchase of gold in the reserves of central banks as the main reasons. On the horizon of 2024, gold will surely have an opportunity to update its historical highs.
On Friday, a gap at 2045 was formed on the daily chart of gold. When trading resumes, the bears will try to close this gap, which can be used to build up long positions at a more favorable price. The short-term growth target is 2070.
Consider the following trading strategy:
Buy gold at the level around 2045. Take profit - 2070. Stop loss - 2035.
Traders may also use a Trailing stop instead of a fixed Stop loss at their discretion