Failed attempt to update its highs takes gold to 2,470

On Friday, gold prices were quite close to updating the historical high, but the day ended with massive sell-offs. Market participants started to take profits close to the level of 2,530, which keeps continuing at today's trading session. The medium-term uptrend retains its importance, but even within its framework the price of the yellow metal may continue to correct. The current pullback in gold prices is quite likely to reach the 2,470 level.

The drop in the price of the yellow metal followed the publication of the US labor market report for August. Contrary to the pessimistic forecasts expressed by many analysts, the real data turned out to be in line with the expectations, with wage growth accelerating from 3.6% to 3.8%. All in all, the released statistics confirms the relevance of the Fed's key rate cut by 0.25% on September 18, but there is no talk of a larger-scale easing by 0.5%. This may disappoint the bulls in the gold market.

Daniel Ghali, an expert at TD Securities, believes that traders' expectations about gold price growth are overstated. In his opinion, gold no longer receives support from the buyers of the metal in Asia. Previously, local investors tended to purchase safe-haven assets because of the steady weakening of their national currencies. However, the decline in the dollar has made this strategy less appealing, and gold is no longer in high demand at its current price. TD Securities estimates that gold consumption in Asia will recover when prices reach about $2,300.

The cooling of the Asian gold market is also confirmed by the data from the People's Bank of China (PBOC). The regulator did not replenish its reserves of the yellow metal for the 4th month in a row in August. The decision of the PBOC to suspend gold purchases directly affects the weakening demand of the retail investors in the country. Julius Baer analysts expect China's central bank to resume its purchases, but not at today's high prices.

Now the attention of the gold market participants shifts to the US inflation statistics, which will be presented on Wednesday. If the data does not show a sharp slowdown in price growth, gold prices may fall even lower, down to the level of 2,470.

Consider the following trading strategy:

Sell gold at the current price. Take profit – 2,470. Stop loss – 2,510.