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David Becker
Comex Gold
Comex Gold

Gold prices rebounded on Wednesday, pushing up against resistance which is the former breakdown level near the 10-day moving average at 1,231.  A softer than expected German IFO report was offset by robust EU money supply and a drop in U.S. New Home Sales.  Traders await the Fed and the Bank of Japan which will help determine the future direction of the Greenback. Support on the yellow metal is seen near the July lows at 1,211. Target support is seen near the July 2017 lows at 1,204.  Momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line).

The Dollar continues to Consolidate

The dollar continues to trade sideways as traders look to the greenback to determine the future movement of gold prices.  The yield differential, which is the difference between the treasury yield and the bund yield, continues to chop sideways making it difficult to see the future direction of the EUR/USD currency pair. Traders now await next weeks Bank of Japan meeting, where traders appear to believe there will be a more hawkish BOJ. The Federal Reserve also meeting next week, but the futures market reflects an unchanged interest rate decision from the Fed.

Fed Chairman Powell, in his testimony infront of both houses of congress, laid the groundwork for future normalization that is driven by data.  While there are expectations of a plus 4% growth rate in the U.S. in the Q2, the Fed believes that growth will moderate in the H2 of 2018. Inflation in the U.S. is now at the upper end of the Feds range, but also will likely moderate allowing the dollar to ease and gold prices to remain buoyed.

 

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