Gold Price Prediction – Gold Prices Consolidate and Close at a 6-year Weekly High

Weak housing data weighed on short term yields
David Becker

 

Gold prices moved lower on Friday after closing on Thursday at a fresh 6-year high. For the week gold prices moved up by 1.2%. US yields were mixed. The 2-year continued to move south but the 10 and the 30-year US moved higher after the 30-year yield settled at an all-time low on Thursday. Gold experienced a safe haven bid this week, but on Friday, riskier assets rebounded. While most of the US data this week was stronger than expected including robust US Retail sales which came in stronger than anticipated, the US housing market saw a pullback despite declining US yields, which should improve borrowing costs.

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Technical Analysis

Gold prices moved sideways on Friday but broke out for the week and closed at a fresh 6-year weekly high. Resistance is now seen near the March 2013 highs at 1,616. Support is seen near the 10-day moving average at 1,492. Short term momentum has turned positive as the fast stochastic generated a crossover buy signal. The current reading on the fast stochastic is 87 above the overbought trigger level of 80 which could foreshadow a correction. Medium-term momentum is positive and the MACD histogram is printing in the black with an upward sloping trajectory which points to higher gold prices.

Homebuilding Declined in July

US Housing Starts fell for a third straight month in July amid a steep decline in the construction of multi-family housing units, but a jump in permits to a seven-month high offered hope for the struggling housing market. Housing starts dropped 4.0% to an annual rate of 1.191 million units last month, according to the Commerce Department. Data for June was revised down to show homebuilding falling to a pace of 1.241 million units, instead of dropping to a rate of 1.253 million units as previously reported. Expectations were for housing starts to rise to 1.257 million units in July. The 30-year fixed mortgage rate has dropped to 3.60% from a peak of 4.94% in November.

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