Gold Price Prediction – Gold Rallies as the Dollar Continues to Slide

Gold prices continued to break out as the dollar eased and US yields moved lower. The 10-year US yields tumbled to 2.56% the lowest since January of 2018. With the yield differential moving against the greenback, both the euro and the yen gained ground. This came despite better than expected private payrolls reported by ADP which was offset by a stronger than expected ISM manufacturing report which tumbled.

Technical Analysis

Gold prices are on the move, breaking out above the 1,291 level, and poised to test target resistance near the June 2018 highs at 1,303. Support on the yellow metal is seen near the 20-day moving average ate 1,256 and then again the 50-day moving average at 1,236. Momentum is positive as the MACD (moving average convergence divergence) histogram is printing in the black with an upward sloping trajectory which points to higher prices. The fast stochastic is in overbought territory printing a reading of 94, above the overbought trigger level of 80 which could foreshadow a correction.

Private payrolls increased by 271,000 in December, according to ADP beating expectations that jobs would increase by 178,000.. The increase in private payrolls was the largest climb in nearly 2-years and increased the 2018-month average of private payroll gains to 203,000. The report showed the increase in jobs was mainly drive by professional and business services which increased by a solid 66,000 while education and health services contributed 61,000 and leisure and hospitality added 39,000. In all, service-related industries were responsible for 224,000 of the new hires, while goods producers rose by 47,000. This include an increase in construction which grew by 37,000 and manufacturing added 12,000. Natural resources and mining lost 2,000 positions.

Claims Rose More than Expected

Initial claims rose 10,000 to 231,000 for the week ended Dec. 29, according to the Labor Department. Expectations were for claims to increase to 220,000 in the latest week. Data for the prior week was revised higher to show 5,000 more applications received than previously reported. The four-week moving average of the so-called continuing claims rose 26,000 to 1.70 million.