Advertisement
Advertisement

Gold Price Prediction – Gold Rallies as the Dollar Eases

By:
David Becker
Published: Sep 5, 2018, 19:19 UTC

Gold prices rebounded on Wednesday but were unable to recapture resistance near the 10-day moving average.  The dollar lost ground on Wednesday as yields

Gold daily chart, September 05, 2018

Gold prices rebounded on Wednesday but were unable to recapture resistance near the 10-day moving average.  The dollar lost ground on Wednesday as yields edged lower despite Tuesday’s much stronger than expected US ISM manufacturing report.  Traders now await Thursday’s ADP private payroll report, and Friday’s BLS government payroll report which is expected to show a 190K increase in total jobs created in the United States. A wider than expected trade deficit weighted on the greenback, and put pressure on riskier assets, which help buoy gold prices.

Technical Analysis

Gold prices edged higher but were unable to break through resistance at 1,199. Support on gold prices is seen near the August lows at 1,160.  Positive momentum is decelerating as the MACD(moving average convergence divergence) histogram is printing in the black with a declining trajectory which points to consolidation. The fast stochastic is moving lower, and reflects accelerating negative momentum. The index generate a crossover sell signal in oversold territory last week which also points to lower prices.

Trade Deficit Increases to Widest in 5-months

The Commerce Department reported that the US trade deficit increased by 9.5% to $50.1 billion in July, widening for a second straight month. Data for June was revised lower to show the trade deficit rising to $45.7 billion. The trade deficit with China surged to 10% to a record of 38.8 billion.  The decline in soybean exports was one of the catalysts for the drop. Expectations were for the deficit to actual increase more to 50.3 billion in July. The widening of the deficit has been driven by the trade spats that the United States is having with Canada, Mexico, the EU and China. One positive for gold is that the dollar turned around after strengthening on Tuesday. Since gold is priced in dollars, a strong US currency makes gold more expensive in other currencies.

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.

Did you find this article useful?

Advertisement