Gold Price Prediction – Gold Rebounds at Support Despite Robust Inflation Data

Core PPI comes in hotter than expected
David Becker
Comex Gold

Gold prices moved lower but rebounded into the session close, to settle nearly unchanged, forming a doji day with a long tail. Prices touched support as the dollar initially gained traction following a stronger than expected US Core PPI report. The US yields whipsawed but were mostly unchanged. Gold has eased as the safe haven allure came off the value as the US agreed to hold off any tariffs on Mexican imports into the United States.

Technical Analysis

Gold prices whipsawed and moved higher touching support near the 10-day moving average at 1,318. Additional support is seen near the 50-day moving average at 1,290. Momentum has turned neutral. The fast stochastic generated a crossover sell signal in overbought territory. The current reading on the fast stochastic is 78, just below the overbought trigger level of 80. The RSI (relative strength index) moved lower reflecting decelerating positive momentum. The RSI moved from overbought to neutral and reflects consolidation. The MACD (moving average convergence divergence) histogram is printing in the black with a declining trajectory which points to consolidation.

US PPI Rises

The Labor Department on Tuesday reported that the US producer price index increased 0.1% in May after gaining 0.2% in April. On a year over year basis PPI climbed 1.8%, slowing from April’s 2.2% advance. Expectations were for PPI to increased by 0.1% in May and 2.0% on a year-on-year basis. Producer prices excluding food, energy and trade services rose 0.4% last month, matching April’s gain, according to the Labor Department. The so-called core PPI increased 2.3% in the 12 months through May after rising 2.2% in April. Weaker energy and food prices, however, partially offset the increase in services last month.

The market continues to price in 2-rate cuts in 2019, based on easing inflation and lower jobs data. Global interest rates are also very low with European short rates in negative territory. The bond market is screaming for rate cuts, with tariffs beginning to erode global growth.

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