Gold Price Prediction – Gold Consolidates Despite Robust U.S. GDP Report

Gold prices consolidated trading sideways as a robust US GDP report was offset by an upbeat inflation forecast for the ECB.  The dollar held steady against most major currencies providing little backdrop for an change in the price of the yellow metal.  Resistance is seen near the 10-day moving average at 1,227, while support is seen near the July lows at 1,211.  Momentum is neutral as the MACD (moving average convergence divergence) histogram prints near the zero-index level with a flat trajectory which reflects consolidation. The sideways price action has substantially reduced both historical and implied gold volatility. Gold prices move in tandem with the Euro which generally is a function of the movements of the yield differential between the German 10-year yield and the U.S. Treasury yield.

U.S. GDP show and increase of 4.1% year over year growth in Q2, which was slightly less than expected but a strong increase relative to the slightly more than 2% increase that was experience in the first quarter of 2018.  The Q2 increase in growth was the strongest rate seen since 2014 during the Obama years. The boost was driven by consumption which increased 4%, and business investment that increased by 5.4%. Following the stronger than expected numbers, President Trump tweeted that growth in the U.S. could hit 8-9% in the next few years.

With yields in the U.S. having a difficult time breaking through the 3% market for the 10-year treasury, gold prices have remained buoyed.  The 10-year yield should be the tell for traders. A break through the 3% mark, should increase the yield differential over German yields providing an impetus for a rally in the U.S. dollar, paving the way for lower gold prices.

Traders now await next weeks ISM manufacturing report, the ADP Payroll report and the Department of Labors employement report. Expectations are for an increase across the spectrum which should lift yields and help buoy the greenback. This inturn should weigh on gold prices.