Gold Price Prediction – Gold Edges Higher as Safe Haven Needs Continue

Gold prices continued to trade sideways forming a bull flag pattern that is a pause that refreshes higher. Stronger US yields relative to Europe and Japan are buoying the dollar which is weighing on gold prices. Gold has benefited from a flight away from riskier assets during the past 2-weeks, as stock prices have traded on the defensive.  Weaker than expected Chinese economic data including GDP and Industrial production also buoyed gold prices.

Technical Analysis

Gold prices continue to trade sideways forming a bull flag pattern which is a pause that refreshes higher. Prices broke out last week and have since moved in a consolidative trading pattern as both bulls and bears jockey for position. Short term resistance is seen near the October highs at 1,233, and target resistance is seen near the July highs at 1,265. Support on the yellow metal is seen near the 20-day moving average at 1,204.  The 20-day moving average crossed above the 50-day moving average which shows that a medium-term up trend is now in place. Momentum has turned neutral as the MACD (moving average convergence divergence) index prints in the black with a flattening trajectory which points to consolidation. The fast stochastic generated a crossover buy signal, which reflects accelerating positive momentum. The only issue is that the fast stochastic is printing a reading of 84, which is above the overbought trigger level of 80 which could foreshadow a correction in gold prices.

Chinese Reported Soft GDP

China reported third quarter GDP in addition to September retail sales and Industrial production.  GDP grew 6.5% year over year versus expectations of a 6.6% increase, while IP rose 5.8% year over year vs. 6.0% expected.  On the other hand, retail sales rose 9.2% year over year vs. 9.0% expected.  What’s more telling is that Chinese policymakers are stepping up stimulus and market support, which tells us that growth is slowing more than desired.