Gold Price Prediction – Gold Forms Bear Flag Pattern but Remains Oversold

Gold prices are trading sideways and are forming a bear flag continuation pattern which is a pause that refreshes lower. This comes despite a small bounce in the Euro as the dollar gives back some of its recent gains.  The ECB was on the tape on Monday discussing the important of their dovish process. Rate in the Eurozone should remain low as the U.S. diverges which could pave the way for lower gold prices.  Support on the yellow metal is seen near the December 2017 lows at 1,236. Resistance is seen near the 10-day moving average at 1,280. Negative momentum is decelerating as the MACD (moving average convergence divergence) histogram prints in the red with an increasing trajectory which points to consolidation. The fast stochastic generated a crossover buy signal in oversold territory which could foreshadow a correction.

The ECB was on the Tape Discussing QE

ECB’s Vasiliauskas highlights importance of QE reinvestments. The council member that “from the current perspective”, the ECB could maybe discuss further steps in autumn next year, which ties in with Draghi’s announcement that rates will remain on hold at least through the summer of 2019. He implies that monetary policy is pretty much on hold and Vasiliauskas stressed again the importance of re-investments, as the ECB also vowed to keep the current stock of asset holdings steady. In this respect there has been some speculation on possible changes to the guidelines on re-investment, which could include a lengthening of the time frame during which re-investments have to incur as well as more flexibility on the types of assets.

ECB’s Praet Said that Rates on hold if necessary

The Executive Board member told Portugal’s Expresso that interest rates in the Eurozone will remain at current levels “as long as necessary to ensure that inflation developments remain in line with current expectations of a sustained adjustment path”. Praet said new uncertainties emerged this year, including weaker dynamics in international trade linked to a stronger EUR, protectionism and Brexit. The ECB will continue monitoring risks and “maintain what we call optionality”.