Gold Potential Retracement Ahead

Andreas Thalassinos
Andreas Thalassinos

18.3.2024

The price of Gold concluded the week above the 23.6 percent Fibonacci retracement of the recent rally amid mounting inflationary pressure, the appreciation of the US Dollar, and the potential for an extended period of high interest rates. It is important for traders to closely monitor the price trends of the precious metal especially in light of the forthcoming release of significant economic data that could impact the direction of Gold prices in the market. 
 

Overview

The price of Gold concluded the week above the 23.6 percent Fibonacci retracement of the recent rally amid mounting inflationary pressure, the appreciation of the US Dollar, and the potential for an extended period of high interest rates. 
It is important for traders to closely monitor the price trends of the precious metal especially in light of the forthcoming release of significant economic data that could impact the direction of Gold prices in the market. 

Upcoming Economic Events

Tuesday Tentative: Monetary Policy Statement (JPY)
Tuesday 03:30 am (GMT): Cash Rate (AUD)
Tuesday 12:30 pm (GMT): Consumer Price Index (CAD)
Wednesday 07:00 am (GMT): CPI y/y (GBP)
Wednesday 06:00 pm (GMT): Federal Funds Rate (USD)
Thursday 12:30 am (GMT): Unemployment Rate (AUD)
Thursday 08:15 am (GMT): French Flash PMI (EUR)
Thursday 08:30 am (GMT): SNB Policy Rate (CHF)
Thursday 09:30 am (GMT): Flash PMI (GBP)
Thursday 12:00 pm (GMT):  Official Bank Rate (GBP)
Thursday 12:30 pm (GMT):  Unemployment Claims (USD)
Thursday 01:45 pm (GMT): Flash PMI (USD)
Friday  07:00 am (GMT): Retail Sales m/m (GBP)

Fundamentals

The latest US inflation data exceeded expectations and rose higher than anticipated last week, raising concerns regarding the containment of inflation.

In February, Core CPI, the price of goods and services purchased by consumers, excluding food and energy, increased by 0.4 percent, exceeding the 0.3 forecast, as it did in January.

Also, the Producer Price Index, which is considered a leading indicator of consumer inflation, exhibited an increase of 0.6 percent, surpassing the forecast of 0.3 percent by double.

PPI captures average price shifts before they reach consumers and serves as a potential signal for the prices consumers ultimately end up paying.

Technical Analysis

Since the formation of the trough at 1984.16 dollars per troy ounce on February 14, Gold has broken above the Bollinger squeeze and "walked the bands" to establish an all-time high of 2195.17. Subsequently, the precious commodity found support at the 23.6 percent Fibonacci retracement, which was drawn from the trough at 1984.16 to the peak of 2195.17. While Gold remains in an uptrend, the possibility of a correction is on the table. The 20-period Moving Average and the Momentum oscillator agree with the bullish outlook. Specifically, the prices hover above the Moving Average line, and the Momentum remains above the 100 baseline. On the other hand, the Relative Strength Index has dropped below the overbought zone, signaling a correction.

Downside Potential Targets

2146.03: The first potential target is calculated at 2146.03 using the Fibonacci Retracement tool drawn from the trough at 1984.16 to the peak of 2195.17.
2115.10: The second price target is the 38.2 percent Fibonacci Retracement.
2090.10: The following potential price objective is seen at 2090.10, representing the 50.00 percent retracement of the latest rally.
2065.10: The fourth potential support level is estimated at 2065.10, corresponding to the 61.8 percent Fibonacci Retracement.

Conclusion and Considerations

In conclusion, the trajectory of the price of Gold has been upward, but market analysts predict it may experience a retracement in light of the significant inflationary data, extended high-interest rates, and the potential strengthening of the US Dollar. While the current market conditions may suggest a short-term decline in the price of Gold, its long-term potential remains positive due to its perceived value as a store of wealth and a hedge against inflation.

 

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Andreas Thalassinos
Andreas Thalassinos

Andreas Thalassinos is a recognized authority in the financial markets and world renowned for his expertise in algorithmic trading. He is a Certified Technical Analyst and highly respected lecturer in the education of traders, investors, and financial markets professionals. Thalassinos has played a key role in the development of education within the industry, training tens of thousands of traders of all skill levels. Traders value his seminars and workshops for the rich content, his passionate, charismatic, and lively presentations.