Gold Price Prediction – Gold Consolidates in Quiet Trade

Gold prices traded sideways on Monday as liquidity was soft during the US Labor Day holiday. Prices were hovering above the 10-day moving average at 1,199.  The dollar gained traction generating headwinds for the yellow metal. This came despite a weaker than expected Chicago purchasing managers’ report that slightly lifted US yields and buoyed the greenback. Concerns over a Chinese and US trade dispute continue to buoy the dollar which helps to cap the upside movements in riskier assets such as stocks. Next week will be a short-week in the US, but the ISM, along with the ADP private payroll report and the BLS payroll report will help generate volatility.

Technical Analysis

Gold prices moved lower and close near the lows of the session, but held support near the 10-day moving average at 1,199.  Resistance on the yellow metal is seen near the 50-day moving average at 1,222. Prices remain in a downtrend and will need to take out the 50-day moving average to breach the downtrend.  Positive momentum is decelerating as the MACD (moving average convergence divergence) histogram is printing in the black but the trajectory of the histogram is declining which points to consolidation. The fast stochastic generate a crossover sell signal and has moved out of overbought territory which also points to consolidation.

The Chicago PMI was Weaker than Expected

The ISM released a better than expected Chicago Purchasing Managers Index which fell to 63.6 in August from a robust 65.5 in July.  Economists had expected the PMI to decline to  63.8.  The Chicago reading is the last reading before Tuesday’s national ISM manufacturing report. Most of the other regional reports that were revealed for August were flat.

The ISM also reported that the Prices Paid component of the PMI report was above 80 for second consecutive month. This shows that inflation expectations remain very high for Chicago manufacturers.  The business barometer that is reported with the PMI numbers slipped to a 3-month low.