Gold Drops as Dollar Gains Traction

Gold prices moved lower sliding through support near the 10-day moving average which is now seen as resistance near 1,343.  Support is seen near an upward sloping trend line near 1,331. Prices remain rangebound and prices are trading sideways. Momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line). The fast stochastic also generated a crossover sell signal.

German PPI inflation accelerated

German PPI inflation accelerated to 1.9% year over year from 1.8% year over year, with prices up 0.1% month over month. The uptick in the headline rate was slightly less pronounced than anticipated. And uptick in intermediate goods prices was the main driver with prices for metals rising 4% year over year in March. Energy prices were up 2.4% year over year and excluding energy PPI stood at 1.7% year over year. PPI clearly is already at levels that the ECB would like to see for headline CPI, but with energy prices now rising sharply, and German wage agreements coming in on the high side, the risk that inflation will in fact surprise on the upside in the medium term is rising.

Japan’s headline inflation slowed in March

Japan’s headline inflation slowed in March from February, highlighting the central bank’s struggle to hit its 2 percent price growth target. The core consumer price index, which includes oil products but excludes volatile fresh food prices, rose 0.9 percent year-on-year in March, matching economists’ median estimate, Ministry of Internal Affairs and Communications data showed on Friday. It followed a 1.0 percent gain in February.

Fed hawk Mester, a voter, reiterated gradualism in her comments, noting it will help avoid a build-up of excess and hence help sustain the expansion. Further rate hikes are appropriate this year and next, she wrote in the text of her speech. She expects inflation to rise to the 2% target, or over it, in the next one or two years, but doesn’t see a sharp spike. The U.S. is slightly beyond the level of maximum employment, she believes.