Gold Price Prediction – Gold Consolidates Experienced Dead Cat Bounce

Gold prices experienced a dead cat bounced after tumbling to support levels on Monday.  The dollar took a breather, consolidating and trading sideways which cast a directionless shadow over the yellow metal.  The strength of the dollar has been the story in the capital markets, despite treasury yields edging lower, and not pushing above the 3% handle. Import prices were nearly unchanged and should continue to face headwinds as a stronger dollar reduces the cost in other currencies.

Technical analysis

Gold prices traded sideways as traders where unwilling to take a stab they would move higher. Prices are trading just above the August lows at 1,190. Resistance is seen near the former breakdown level with was the July 2017 highs at 1,204, and then the 10-day moving average at 1,207. Momentum has turned negative as the MACD (moving average convergence divergence index) line 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). The fast stochastic also generated a crossover sell signal, which reflects accelerating negative momentum. The current reading of 11, is below the oversold trigger level of 20 and could foreshadow a correction.

Import Prices Rose Year over Year to a 6-Year High

According to the Bureau of Labor Statistics import prices were unchanged in July compared to an upwardly revised 0.1% increase in June. The upward revision of 0.5% from a previously reported decline of 0.4% is notable.  Expectations were for import prices to rise 0.1%. Import prices increased 4.8% year over year which is the largest gain since February 2012.  The increase in July import prices was driven by fuel and lubricants which increased 1.6%. This was offset by a decline in food prices which dipped 1.8%. Inflation has been higher year over year which coincides with the CPI reading last week that mimiced the strong year over year performance.