Gold is set to decline on signals that the U.S. economy is heading for a soft landing. The latest data shows that the Federal Reserve (Fed) is successfully fighting inflation.
Investors are now estimating a weaker-than-expected employment report in the U.S., which confirms that the economy is gradually slowing down and eases fears that markets are facing a painful rut characterized by high inflation and sluggish growth.
Chicago Fed President Austan Goolsbee said on Friday that additional reports similar to April’s would boost confidence that the economy is not overheating and it also might strengthen the case for easing monetary policy this year.
Fed Chairman Jerome Powell had earlier denied the need to raise rates and said that cuts would take place as soon as incoming data justified it.
Higher interest rates tend to put downward pressure on the gold price as it does not pay interest unlike Treasury bonds with yields tied to Fed rates.
In addition, gold is also under downward pressure due to weakening demand for safe-haven assets driven by the positive economic outlook. The value of safe-haven assets, including gold, is beginning to decline as investors withdraw their money from them.
Gold has also become less attractive in recent weeks because there are signs that the Middle East could avoid a potential full-scale conflict.
From a technical point of view, gold is heading towards 2,230.0. This level is considered a target because it was a local high that the market failed to retest.
The overall recommendation is to sell XAUUSD.
Profits should be taken at the level of 2,230.0.
A Stop-loss could be set at the level of 2,390.0.
The possible loss should not exceed 2% of your deposit funds.
This content is for informational purposes only and is not intended to be investing advice.
