Gold Price Prediction – Gold Rallies Hitting Fresh 6-year Highs

Gold prices remain overbought
David Becker
Gold Chart

Gold prices continue to rally, despite a consolidating in the US dollar and sideways price action in US yields. The dollar was mixed against most major currencies as geopolitics continued to weigh on riskier assets. Gold prices continue to benefit from safe-haven flows, as President Trump responded to Iran’s comments that sanctions on its supreme leader created an embargo on future negotiations.

Technical Analysis

Gold prices surged higher on Monday and tested 6-year highs near the May 2013 peak at 1,439. Support on the yellow metal is seen near the 10-day moving average at 1,369. Momentum remains positive as the MACD (moving average convergence divergence) histogram prints in the black with an upward sloping trajectory which points to higher prices. Prices are overbought. The relative strength index (RSI) surged higher reflecting accelerating positive momentum. The current reading on the RSI is 87, well above the overbought trigger level of 70 which could foreshadow a correction. Prices can remain overbought for an extended period when a breakout such as this one occurs. This is the second higher reading on the RSI in the past 10-years, which shows how quickly the market has accelerated. Short term momentum is decelerating. The fast stochastic generated a crossover sell signal in overbought territory. The currency reading on the fast stochastic is 91, well above the overbought trigger level of 80 which also foreshadows a correction.

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Powell Responds to Trumps Complaints

Federal Reserve Chairman Jerome Powell was on the tape and stressed the central bank’s independence in a speech Tuesday. His message was for the markets and for the President saying that the Fed will not be influenced for short term political gains. He spoke during an event at the Council on Foreign Relations in New York. His remarks mirrored those from last week’s Fed meeting, and he emphasized that policy is under review. President Trump has been criticizing Powell for higher rates. Trump ahead of the 2020 elections wants rates lower to boost the economy ahead of the campaign season. No president wants to campaign during a contraction in economic growth.

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