Gold finished Friday's trading with a decline, amid a strengthening dollar and a partial fixation of long positions after the update of the annual maximum.
The strong growth of gold on Thursday was triggered by careless comments by the head of the Federal Reserve Bank of New York, who, in his scientific report, spoke of the need to respond more quickly to signs of a weakening economy. Many investors perceived this as a signal of a possible reduction in the interest rate by 0.5% at the next FOMC meeting. Later, representatives of the Federal Reserve Bank of New York completely refuted this information and the quotations of the main financial instruments, including gold, began to return to their previous levels.
In the near future, speculation about the possible actions of the Fed to adjust the basic parameters of monetary policy will have the strongest influence on the dynamics of market. The market expects a rate cut at the July meeting by 25 bp with almost 100% probability. Accordingly, any events, statements and comments that can change these expectations can provoke quite strong market fluctuations.
There is no important news in the economic calendar today, so the main influence on gold will be on the US dollar and the situation on stock exchanges, where major indexes are still showing moderate growth, indicating a decline in demand for protective assets.
On the chart, despite the rather strong correctional pullback, the bullish trend remains relevant. Therefore, from strong levels of support we can expect the resumption of upward movement. The nearest such level is at 1405.00, but, one should not exclude the scenario with the completion of the corrective movement at the level of 1418.00.
Resistance Levels: 1438.00, 1450.00, 1460.00;
Support levels: 1418.00, 1405.00, 1383.00.
The main scenario - a decline to 1418.00 and the resumption of upward movement.
An alternative scenario - the breakdown of support at 1418.00 and a decline to 1405.00.
In the Medium-term, the bull trend is still relevant, therefore, preference in trading should be given to longs. We are looking for entry points at support levels 1418.00 and 1405.00