Gold Price Prediction – Gold Consolidates as Short-term Momentum Turns Negative

Gold prices moved lower on Monday and continued to consolidate following Friday’s larger than expected US jobs report. The 306K increase was more than double expectations, and wages remained buoyed. US yields moved higher allowing the dollar to gain traction which paved the way for lower gold prices. Weaker than expected PMI data released in both China and the UK, showed that the global economy is continuing to decelerate.

Technical Analysis

Gold prices moved lower and prices continued to consolidate, and are poised to test support near the 10-day moving average seen near 1,303.  The short-term trend remains upward. Resistance is seen near the February highs which coincides with the May 2018 highs at 1,325. Positive momentum is decelerating as the short-stochastic generated a crossover sell signal. Additionally the fast stochastic is printing a reading of 82, above the oversold trigger level of 80, which could foreshadow a correction. Medium term positive momentum is decelerating as the MACD (moving average convergence divergence) histogram is printing in the black with a declining trajectory. The MACD is poised to generate a crossover sell signal.

Chinese Private PMI’s Eased

Over the weekend, China reported that its Caixin services PMI slipped to 53.6 in January from 53.9, but the result was slightly better than expected. The beat was driven by a rise in new orders driven by exports. The composite index fell to 50.9 from 52.2. Overall the decline in the PMI’s appears to be decelerating.

The UK Continues to Report Soft PMI Data

UK reported weak construction PMI on Monday. The index came in at 50.6 versus expectations that it would increase to 52.5.  It will be followed by services and composite PMIs Tuesday.  Manufacturing PMI was reported Friday at a weaker than expected 52.8, and so the Brexit uncertainty continues to take a toll on the economy.  Despite the weakness the pound rebounded allowing the dollar to gain traction which put pressure on gold prices.

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