Gold Price Prediction – Gold Breaks Out, as Momentum Turns Positive

Gold prices broke out and surged higher as the dollar eased against most major currencies. US data over the last week was weaker than expected, which likely reduced GDP during the Q1 of 2019.  The decline in retail sales and Industrial product could have been a function of the US government shutdown, but economists will not be able to determine this until they see February numbers in early March. In the meantime, rates have been facing headwinds despite Fed President Loretta Mester’s prediction that rates will rise during the balance of 2019.

Technical Analysis

Gold prices broke out above resistance which is now seen as support near the January highs at 1,326.  Support below that level is seen near the 5-day moving average at 1,321 and the 20-day moving average at 1,310. Target resistance is seen near the 2018 highs near 1,365. Medium term momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in the black with an upward sloping trajectory which points to higher prices. Short-term momentum is accelerating, but the fast stochastic is now printing a reading of 89, which is above the overbought trigger level of 80, which could foreshadow a correction.

Cleveland Fed President Mester Believe Rates Can move Higher

Loretta Mester, the president of the Federal Reserve Bank of Cleveland said Tuesday that interest rates will likely rise slightly this year, assuming the economy grows at the healthy clip. Mester painted 2019 as a transition year for both the U.S. economy and monetary policy. The economy, which likely expanded close to 3% in 2018 thanks to recent tax cuts and spending increases, should slow to a more sustainable pace of growth this year.