Gold Price Prediction – Gold Prices Stabilize as Budget Deficit

Gold prices rebounded near trend line support as the dollar eased and stocks attempted to stabilize. The risk off trade continued but took a breather following Monday’s rout in equities. Gold prices gained traction as the euro stabilized as the US announced a larger than expected budget deficit. With US rates having a difficult time breaking out above the 3.25% level for the 10-year yield, gold might be able to hold steady. Trader’s await Wednesday’s release of CPI which is expected to show a 2.5% year over year gain.

Technical Analysis

Gold prices rebounded near support which is an upward sloping trend line that comes in near 1,199. Resistance on the yellow metal is seen near the 50-day moving average at 1,209. Additional resistance is seen near the 20-day moving average at 1,223. Momentum remains negative as the MACD (moving average convergence divergence) histogram prints in the red with a downward sloping trajectory which points to lower prices. The fast stochastic tumbled reflecting accelerating negative momentum. The current reading of 6, is well below the oversold trigger level and could foreshadow a correction.

The US Budget Deficit Rose

The US government continued to spend in the new fiscal year. According to the U.S. Treasury Department the government ran a $100 billion deficit last month, compared with a $63 billion budget gap in October 2017, as spending growth outpaced revenue growth. As a share of gross domestic product, the deficit totaled 4%. Outlays increased by 18% in the first fiscal month of 2019 on a year over year basis. Spending on Medicare, national defense and interest payments on the debt. The Treasury said government receipts rose 7% in September compared with September 2017, but were only 0.5% of gross domestic product, even as economic output has ramped up this year. The higher deficit will likely bring on higher long term US interest rates.