Gold Price Prediction – Gold Drops as Momentum Turns Negative

Gold prices are trading under pressure after breaking through trend line support.  Momentum has turned negative and will likely weigh on prices as it targets the 2018 lows. A strong dollar and continued trade spat threats is generating demand for U.S. dollars, which is countering, and safe-haven bid gold might receive. Stronger than expected U.S. Housing starts, also help buoy the dollar, which in turn weighed on gold prices.

Technicals

Gold prices have broken down through trend line support which is now seen as resistance near 1,288. Additional resistance is seen near the 10-day moving average at 1,292. Prices were unable to recapture the May lows at 1,282 which is also seen as short-term resistance. Target support on the yellow metal is seen near the December lows at 1,236.  Momentum has turned negative as the MACD (moving average convergence divergence) index 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 MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices for gold. The fast stochastic has tumbled into oversold territory, which reflects accelerating negative momentum. The current reading of 10, is below the oversold trigger level of 20, which could foreshadow a correction.

Strong Housing Starts Buoyed the Dollar

U.S. housing starts rebounded 5.0% in May to 1.350 million after falling 3.1% to 1.286 in April which was revised form 1.287 million, while March was revised to 1.327 million 1.336 million. Building permits tumbled 4.6% to 1.301 million after sliding 0.9% to 1.364 million previously which was revised from 1.352 million. Single family starts were up 3.9% after climbing 2.2% in April which was revised from 0.1%, with multifamily 7.5% higher following April’s -13.5% which was revised from -11.3. Regionally, starts were mixed with a 62.25 surge in the Midwest, while the Northeast declined 15.0%, with the West off 4.1%, and the South down 0.9%.