Gold Price Forecast – Prices Whipsaw Following Fed Decision

David Becker
Comex Gold
Comex Gold

Gold prices whipsawed in the wake of the Fed decision increase interest rates by 25-basis points. The Fed’s guidance remained unchanged with expectations that rates will rise another 50-basis points during the balance of 2018.  The Fed’s unemployment rate level declined to 3.6%, but inflation remained stable. Support on the yellow metal is seen near an upward sloping trend line that comes in near 1,289. Resistance is seen near the 50-day moving average at 1,313. Momentum is neutral as the MACD (moving average convergence divergence) histogram prints in the black with a flat trajectory which points to consolidation.

PPI Was Hotter than Expected

Wholesale price inflation came in much hotter than expected which was in contrast to Tuesday consumer price index. The Labor Department reported that PPI rose 0.5% more than the 0.3% expected.  There were no revisions to April where the headline edged up 0.1% with the core up 0.2%. Year over year headline PPI jumped to 3.1% year over year versus 2.6% year over year, with the core rate at 2.4% year over year versus 2.3% year over year. If the CPI reached these levels, the Fed would be raising rates at a much faster level. Goods prices were up 1.0% last month after a flat reading in April, with energy 4.6% higher versus the prior 0.1% gain, with food prices bouncing 0.1% from -1.1% previously.

Eurozone Q1 employment rose

Eurozone Q1 employment rose 0.4% quarter over quarter, a slight acceleration from the 0.3% quarter over quarter in Q4 last year, but still leaving the annual rate at just 1.4% year over year, down from 1.6% year over year in Q4 last year and versus 1.7% in Q3 2017.

Eurozone industrial production dropped

Eurozone industrial production dropped -0.9 month over month in April, more than feared and leaving the annual rate at 1.7% year over year. This is still a solid annual rate, but a marked declaration from the 3.2% year over year in March. The three-month rate trend rate fell back to -1.2% from -0.6%. As elsewhere in the Eurozone, the overall production number was held back by a sharp drop in energy production in April and manufacturing trends are not quite as weak, still, in the light of other disappointing data releases, the numbers add to signs that the Eurozone recovery is already running out of steam.

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