Gold prices spent the last week consolidating not far from new historical highs. It’s worth noting that the price failed to gain a foothold above the level of $2400 per ounce, and the high set on April 12 at $2431 remains unreached. Fewer and fewer market participants agree to buy the yellow metal at such high prices. As the upside momentum fades, short-term traders could close long positions in anticipation of the first significant correction since February.
According to the latest Bank of America survey, 26% of money managers consider gold an overvalued asset. This figure is the highest since August 2020, when the yellow metal first crossed the level of 2000, and over the next few months it fell in price by 15%. 78% of respondents believe a recession in the global economy in the next 12 months is unlikely. Also, most of them expect only two Fed rate cuts this year. Such conditions are historically unfavorable for gold.
High prices for the yellow metal continue to put pressure on demand. As Swiss customs data showed, the country has sharply reduced gold exports to India. In March, imports amounted to less than 6.6 thousand kilograms, compared to February there is a drop of 82%. And compared to March 2023, the South Asian country's imports fell 60%. Dealers in India have been increasing discounts on physical gold for 6 weeks in a row, but there is still no improvement in the demand situation.
In China, the cooling in the gold market is also noticeable, although it’s less sharp. According to the results of March, 124 tons of gold were withdrawn from the Shanghai Exchange, which is 3 tons less than in February. Usually, March sees seasonal growth as jewelry manufacturers replenish stocks after the traditional surge in sales during the Chinese New Year. However, now gold jewelry retailers are hesitant to increase purchases amid high prices.
The RSI indicator on the daily chart came out of the overbought zone, giving a sell signal. The nearest target for the bears is the level of 2330.
The following trading strategy can be suggested:
Sell gold at the current price. Take profit — 2330. Stop loss — 2390.
This content is for informational purposes only and is not intended to be investing advice.
