Last week the value of gold seemed to have made a trend reversal, starting a new upward rally, but during Friday’s session the value of the precious metal collapsed until it concluded at the support level of €68.25 per gram. The reason behind this high volatility in the value of gold turns out to be the importance of macroeconomic factors that continue to be released from the United States and their impact on the possible monetary policy outlook.
- Last week the value of gold per gram fell by -1.03% to close on Friday at the level of €68.27 per gram.
- From a Forex forecasting point of view, gold’s rapid upward rally towards the absolute ceiling was abruptly interrupted by the horizontal resistance at €72.15 per gram, near which the precious metal performed a trend reversal and started to move towards its support level at €68.25 per gram. Subsequently the correction was slowed slightly by the support offered by the 50-day moving average, but during the next few sessions the value of gold continued the original correction until reaching the primary target and the horizontal support level at €68.25 per gram.
- From a macroeconomic point of view, the value of gold was strongly influenced by data regarding the American labor market last Friday and investors are now awaiting the announcement of the inflation rate which will take place in the early afternoon of June 12th and the following FOMC meeting which will take place a few hours away. Keep up to date on the latest news from the best Italian brokers today.
Expectations of a Federal Reserve interest rate cut continue to plummet
Over the past few weeks, the value of the gold/dollar seemed to have made a trend reversal due to the macroeconomic data coming from the United States, which were communicating a clear slowdown in the economy which could have forced the Federal Reserve to make a cut of interest rates earlier than expected despite the persistence of inflation. in fact, the value of gold is inversely correlated to interest rates as the precious metal is generally seen as a safe alternative asset to bonds.
The upward trend, however, was quickly interrupted and reversed during Friday’s session when American data showed a very strong increase in jobs added during the month of May, which surprised both investors and analysts on the upside. thanks to a value 65% higher than the number of jobs added during April.
This data communicated the stability and resilience of the American economy, reducing the pressure on the Federal Reserve to reduce interest rates to avoid a possible recession. As a result, the probability of a rate cut during July reached almost zero percent.
Gold Price Has Reached Downward Target!
Due to the rapid collapse on Friday and the trend reversal thanks to the resistance of the 50-day moving average, the value of gold reached the downside target identified by the support level at €68.25 per gram.
Now the price of the precious metal has concluded close to the support level, which was tested by a short bearish shadow. This type of Japanese candlestick communicates a good probability that the price of gold may begin a period of consolidation before a trend reversal, rather than a continuation of the collapse below the support level.
Furthermore, the value of the RSI technical indicator appears to be relatively low at around 45, signaling that the current level is slightly extended downwards and that in the short term a period of consolidation may be necessary before a possible resumption of the original trend.
Gold Weekly Outlook
- Current resistance level: €72.15, the resistance zone at which the value of gold has reversed its trend after reaching its absolute maximum.
- Current support level: €68.24, identified by the confluence of support formed by the key horizontal level and the 50-day moving average.
- Upside target: €72.15 per gram.
- Downside target: €66.00 per gram, identified by the 100-day moving average, which could provide a strong level of support, at least in the short term.
From the gold forecast today, considering the sharp collapse in the value of gold during the Friday session, the most probable weekly scenario appears to be the start of a period of consolidation near the support level at €68.25 per gram. Subsequently, the value of gold could start trading higher again especially if central banks once again increase their purchases of gold thanks to the much lower price compared to last month. You can take advantage of the fall in gold by starting to trade with a gold broker authorized in Italy.
Nonetheless, it is extremely important to stay up to date with macroeconomic news and especially Wednesday’s inflation announcement and FOMC meeting, which could significantly influence the value of gold.
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