Gold moves out of trend for more profit taking

On Monday, gold prices showed positive dynamics due to weakening of the dollar and growing expectations of interest rate cuts in the U.S. Market participants focused on economic data in search of additional signs of future monetary policy of the Federal Reserve System (Fed).

The dollar weakened in response to U.S. President Joe Biden's decision to withdraw from his election campaign on Sunday. This paved the way for another democrat to challenge republican candidate Donald Trump.

According to the CME FedWatch Tool, markets are pricing in a 97% chance of the Fed cut rate in September. The prospect of rate cuts and political uncertainty in the U.S. are supporting gold prices.

The market will focus on Friday's Personal Consumption Expenditures (PCE) data in the U.S. Other important releases this week include home sales data, preliminary indexes of business activity from S&P for July and advance GDP for the second quarter.

According to Invesco research, geopolitical rivalry, including looming trade battles between the U.S. and China, is becoming a major concern for sovereign wealth funds and central banks, outweighing inflation expectations. Increased geopolitical tensions will certainly play into the hands of precious metals.

Nevertheless, the market has already taken into account the economic and political uncertainty, and profit taking from the last gold growth started last week. In this context, gold may roll back to key support at the level of 2350.

At the technical level, gold quotes on the H4 chart went beyond the growing trend. Bulls Power and Bears Power indicators (standard values) are in the negative zone, confirming the strength of bearish sentiment and the formation of a sell-side movement.

Signal:

The short-term outlook for GOLD is to buy.

The target is at the level of 2350.00.

Part of the profit should be fixed near the level of 2390.00.

A stop-loss could be placed at the level of 2450.00.

The bearish trend is short-term, so trade volume should not exceed 2% of your balance.