Gold Price Prediction – Gold Continues to Trend Higher

Gold prices continue to move higher on Thursday following a respite from the Christmas Holiday. This comes as the People’s Bank of China pumped a huge amount of liquidity into the market pushing the overnight lending rate to the lowest level seen in more than 10-years. The extra-liquidity makes riskier assets more attractive and helped buoy the yellow metal as the dollar dropped and long term US yields moved lower.

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Technical Analysis

Gold prices continued to trend higher and is poised to test the November highs at 1,516. Support is seen near the 10-day moving average near 1,482, which coincides with the downward sloping trend line. Additional support is seen near the 50-day moving average at 1,477. The 10-day moving average crossed above the 50-day moving average which shows that a short term up trend is now in place. Short term momentum continues to accelerate higher as the fast stochastic recently generated a crossover buy signal. The only caveat is that the fast stochastic is printing a reading of 96, above the overbought trigger level of 80, which could foreshadow a correction. The RSI (relative strength index) is now printing a reading of 71, which is above the overbought trigger level of 70, and also points to a potential future correction. Medium-term momentum is positive as the MACD histogram prints in the black with an upward sloping trajectory which points to higher prices.

The PBOC pushed the overnight lending rate to the lowest in 10-years. The 10-year Chinese bond yield decline was extended to  3.11% is the lowest yield in two months.  With China adding to liquidity, the dollar is facing pressure which is helping to buoy the yellow metal.