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David Becker
Gold daily chart, September 11, 2019

Gold prices rebounded on Wednesday bouncing near key support ahead of Thursday’s monetary policy decision by the ECB. US yields moved higher with the 10-year yield hitting a 2-week high, nudging up against key resistance. The dollar moved higher in tandem with US yields, but this did not weigh on gold prices. US PPI came in slightly stronger than expected but wholesale prices remain stable near the 2% year over year range.


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Technical Analysis

Gold prices rebounded at the 40-day moving average which is seen as support near 1,486. This snapped a streak of a 4-consecutive lower trading session. Resistance is seen near the 10-day moving average at 1,518. Short term momentum has turned negative as the fast stochastic recently generated a crossover sell signal. The fast stochastic is accelerating to the downside reflecting increasing negative momentum. Currently the fast stochastic is printing a reading of 9, which is well below the oversold trigger level of 20 which could foreshadow a correction. Medium-term momentum is negative as the MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices.


The ECB is Poised to Generate Stimulus

Ahead of the meeting the market seemed confident in a rate cut and the introduction of quantitative easing, which is the central bank bond purchase program. European rates have declined and are counting on the acknowledgment of asset purchases. Failure to do this would likely lead to a rise in European rates. If the ECB does not move in line with expectations gold prices could be volatile. Higher European rates would buoy the Euro and likely provide a boost to the yellow metal.

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