Gold Price Prediction – Gold Rebounds Despite Soft PMI Data

Gold prices edged higher on Wednesday ahead of Thursday ECB announcement on monetary policy. Softer than expected July EU PMI data could lead the ECB down a path toward additional monetary accommodation. Most believe that the ECB will kick the can down the road until it meets again in September, but there is some chance that the ECB will make a move as early as Thursday.

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Technical Analysis

Gold prices bounced on Wednesday near the 10-day moving average at 1,422. Resistance is seen near the July highs at 1,459. Prices continue to appear to be in a short-term uptrend. Short term momentum is neutral as the fast stochastic is hovering near the signal line. The current reading on the fast stochastic is 56, which is in the middle of the neutral range and reflects consolidation. Medium term momentum remains negative as the MACD (moving average convergence divergence) histogram is printing in the red with a downward sloping trajectory which points to consolidation. The relative strength index is also testing support and a breakdown would reflect accelerating negative momentum.

EU PMI Data is Soft

The EU PMI data for July was much weaker than expected.  The composite PMI came in at 51.5 compared to expectations of 52.2.  Manufacturing was 46.4 versus 47.7 expected and services was 53.3, in line with expectations.  The German composite fell to 51.4 versus 52.4 expected, with manufacturing at 43.1 and services at 55.4.  In France, the composite fell to 51.7 versus 52.5 expected, with manufacturing and services falling to 50.0 and 52.2. The weaker than expected data will be considered when the ECB meets on Thursday and could be the trigger for lower interest rates. Separately, US trade officials will reportedly head to China Monday for face to face talks.  This is a positive sign. The trade agreement has helped buoy gold prices.