At the end of last week, gold prices were influenced by a surge in volatility. On Thursday, the price of the yellow metal experienced a sharp decline, but the next day most of the drawdown was bought back. At today’s trading session, prices continue to recover, approaching the level of $2400 per ounce. At this rate, the bulls can regain control of the level 2420 even before the Fed meeting on July 31.
Buyers in the yellow metal market were clearly not pleased with the US GDP data, which turned out to be much better than forecasts. Nevertheless, Friday’s data on the Personal Consumption Expenditure Price Index (PCE) made long positions in gold attractive again. Despite the strong growth of the US economy, the PCE inflation did not show any acceleration. This made traders optimistic ahead of the Fed’s monetary policy meeting on Wednesday.
Meanwhile, the physical gold market has also experienced an improvement in sentiment. Indian authorities decided to support the weakened demand for precious metals due to high prices by drastically reducing import duties. The fee for importing gold from abroad into the South Asian country was slashed from 15% to 6%. In addition, the holding period, after which gold can be sold without paying capital gains tax, was reduced from 3 to 2 years.
The World Gold Council (WGC) takes a positive view of the measures taken by the Indian authorities to support demand. According to its estimates, the announced reforms will lead to an increase in consumption of the yellow metal in the country by at least 50 tons between August and December. WGC experts have already recorded a significant increase in the attendance of jewelry stores in India, as well as the return of a premium in local prices compared to global prices. Earlier, Indian dealers had to offer discounts due to weak demand, but now there is no such need.
Stochastic indicator on the daily chart of gold gave a buy signal, increasing the probability of further prices growth. After the level of 2400 the next target of the upward movement will be 2420.
The following trading strategy can be suggested:
Buy gold at the current price. Take profit – 2420. Stop loss – 2365.
