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David Becker
Gold daily chart, October 18, 2018

Gold prices moved higher on Thursday as US yields whipsawed initially moving higher following a stronger than expected jobless claims report.  With claims close to a 59-year low, wages should begin to move higher which is why the Fed in its meeting minutes said that it was likely to move to restrictive monetary policy. With short-term policy still somewhat accommodative, its possible that short term rates rise to 3%, which is close where the 2-year yield is currently pricing. This could buoy the dollar and in turn put downward pressure on gold prices.  Despite this scenario, yields moved lower, paving the way for higher gold prices.

Technical Analysis

Gold prices moved higher testing the top end of a bull flag range, which is seen near 1,233. Support on the yellow metal is seen near the 20-day moving average at 1,203. The 20-day moving average crossed above the 50-day moving average which shows that a medium term up trend is in place. Momentum remains positive as the MACD (moving average convergence divergence) histogram prints in the black with a flat trajectory which points to consolidation.

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Leading Indicators Rise

The index of leading indicator increased for the 12th consecutive month in September.  The LIE increased by 0.5% according to the Conference Board which was in line with expectations.

Jobless Claims Declined

US initial jobless claims declined on Thursday falling to 45-year lows as the labor market continues to tighten. According to the Labor Department Jobless claims declined by 5K dropping to 210K for the week ending October 13. Claims fell to 202K during the week ending September 15 which was a 48-year low. Expectations were for jobless claims to fall to 212K in the latest week. The BLS said that issue related to Hurricane Florence continued to affect the jobless claims data. The four-week moving average of initial claims, increased by 2K to 212K in the latest week.

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