Gold Price Prediction – Gold Prices Continue to Rally as ECB Provides Dovish Outlook

David Becker
Published: Jun 6, 2019, 18:52 UTC

Gold is poised to test the 2019 highs


Gold prices moved higher on Thursday following a dovish ECB meeting, where outgoing President Mario Draghi opened the door to an interest rate cut.  With countries around the globe poised to cut rates (Australia recent cut 25-basis points), the yellow metal is becoming one of the more attractive currencies. Gold prices rallied substantially between the beginning of the great recession until the Fed begain to unwind QE, moving up from approximate 1,050 to over 1,800. A breakout of the recent range could see gold prices surge higher.

Technical Analysis

Gold prices continued to rally, closing just below the February 2019 highs at 1,3446. Support on the yellow metal is seen near the 10-day moving average at 1,290. The 10-day moving average recently crossed above the 50-day moving average which means that a short term up trend is now in place. Momentum has turned positive as the MACD (moving average convergence divergence) index recently 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 is printing in the black with an upward sloping trajectory which points to higher prices. Short term momentum has turned negative as the fast stochastic generated a crossover sell signal in overbought terriory. The current reading on the fast stochastic is 87, above the overbought trigger level of 80, which could foreshadow a correction.

The ECB is Dovish

European Central Bank President Mario Draghi made an inference that interest-rate cuts could be in the foreseeable future for the eurozone economy which is a significant policy shift that amplifies a global trend toward easier monetary policy. Draghi is scheduled to leave office in 5-months. His statement is similar to that of Federal Reserve Chair Jerome Powell this week that the Fed could cut short-term interest rates in response to any economic deterioration triggered by trade tensions.

About the Author

David Becker focuses his attention on various consulting and portfolio management activities at Fortuity LLC, where he currently provides oversight for a multimillion-dollar portfolio consisting of commodities, debt, equities, real estate, and more.

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