David Becker
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Gold prices broke out, and continue to rise as yields decline as concerns over the coronavirus buoyed the yellow metal. The rally in gold comes despite a surge in the US dollar to fresh multi-year highs. The dollar index nearly hit 100 for the first time since March of 2017. The 10-year US yield is trading near the low end of its 5-year range and poised to break down. Gold prices have been negatively correlated to US yields and a breakdown would be a confirmation of a further rally in the yellow metal. Gold has historically been negatively correlated to the US dollar. During the past month, this relationship has broken down. While gold in dollar terms has hit a 7-year high, golds value in terms of Euro’s has hit an all-time high.


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Technical Analysis

Gold prices broke out closing at a fresh 7-year high and poised to continue to climb. Prices tested resistance near 1,611 and again closed above 1,600. Support on the yellow metal is seen near the 10-day moving average at 1,579.


Momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram crossed above the zero-index level, which is also a buy signal. The MACD histogram is printing in the black with an upward sloping trajectory which points to higher prices.


Both the RSI (relative strength index) and the fast stochastic are accelerating higher pointing to accelerating positive momentum. The current reading on the fast stochastic is 87, above the overbought trigger level of 80 which could foreshadow a correction.


The Fed Meeting Minutes Express Confidence

Federal Reserve meeting minutes showed that officials expressed confidence at their most recent meeting about the state of the U.S. economy. They believe that interest rates likely would remain unchanged for a while. The central bank’s policymaking group voted to leave its benchmark overnight funds rate in a range between 1.5% and 1.75%. In coming to that decision, Federal Open Market Committee members noted that the outlook for the economy had gotten stronger just since the previous forecast in December.

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