Gold Price Prediction – Gold Consolidates Following Soft Trade Data

Gold prices traded in a tight range on Wednesday, moving sideways for the second consecutive trading session. The dollar also traded sideways despite lower US yields. US yields were pushed lower by a wider than expected trade deficit which will likely weigh on US growth. US private payrolls came out in line with expectations while the Federal Reserve’s Beige Book showed moderate growth in most districts.

Technical Analysis

Gold prices traded sideways and formed a Doji day for the second consecutive trading session. Prices are trading in a tight range waiting for a new impetus to drive prices. Trader’s await Friday’s payroll report from the Department of Labor. Support is seen near the January lows at 1,276, and then an upward sloping trend line that comes in near 1,243. Resistance is seen near the 50-day moving average at 1,301. Prices are oversold as the fast stochastic is printing a reading of 7, well below the oversold trigger level which could foreshadow a correction. The fast stochastic is also about to generate a crossover buy signal which would signal to accelerate short term positive momentum.

US Trade Deficit Widens More than Expected

The US trade deficit continues to widen despite effort from the White House to narrow the gap. The December trade deficit increased to a 10-year high of $59.8 billion, well ahead of expectations, according to the Commerce Department. Expectations were for an increase to $57.3 billion, from November’s $50.3 billion. The increase was drive by a 2.1% increase in imports while exports declined by 1.9%. Slowing global growth is causing a reduction in the demand for US goods, while the strong US economy is driving the demand for imported goods. For the year, the deficit increased by $68.8 billion, or 12.5%, to $621 billion. It was the largest trade gap since 2008. The goods deficit came to $891.3 billion for the year, the highest on record. The trade deficit with China in December was $38.7 billion.