Gold Price Prediction for February 5, 2018

Gold prices moved lower on Friday as the dollar gained traction following the stronger than expected U.S. payroll report. U.S. yields shot above the 2.84% mark, driving the dollar higher which paved the way for weaker gold prices. U.S. yields have soared since the beginning of the year, as stronger wages create inflation fears which boosted the greenback.  The Bank of Japan stepped into the market on Friday to keep yields lower, but appeared to be unsuccessful on Friday.

Technicals

Gold prices formed a topping pattern, breaking below the 10-day moving average which was former support near 1,343.  The bull flag continuation pattern seems to be counter by today’s close and prices could fall to test the January lows at 1,308.  Resistance above the 1,343 level is seen near the 1,366 highs made in January.  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).

BoJ steps in to stop the rise in yields

The BoJ announced its first unlimited fixed-rate bond operation since July in a bid to stem the rise in yields that has left stock markets struggling. The bank offered to buy 5-10 year notes at a fixed rate of 0.11%, while at the same time expanding for a second time the amount of debt purchases at the regular operations. The BoJ’s target for the 10-year yield is around zero percent and it has stepped in twice last year offering to buy unlimited amounts when the 10-year was around the 0.10% mark. The 10-year JGB yield fell back on the BoJ’s action and is at 0.076%, down 1.1 basis points on the day.

Eurozone PPI Fell Back

Eurozone PPI inflation fell back to 2.2% year over year in December from 2.8% year over year in the previous month. Energy price inflation in particular decelerated – to just 0.1% m/m and 3.2% year over year, versus 2.3% year over year and 6.0% year over year in the previous month. However, excluding energy PPI inflation dropped to 2.1% year over year from 2.3% year over year as intermediate goods inflation and non-durable goods inflation declined.