Gold Price Prediction – Gold Retreats as Tariff News Hits the Tape

Gold prices moved lower as the Euro lost ground, generating headwinds for the yellow metal. The dollar was mixed, losing ground against the Yen, as yields pulled back despite a stronger than expected Personal Spending and Income report.  International Trade news again focused on Tariff that are scheduled to be issued on China by the United States, also weighed on gold prices.

Technical Analysis

Gold prices moved lower on Thursday but held above support levels near the 20-day moving average at 1,198.  Resistance on the yellow metal is seen near the August highs at 1,219.  Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal just below overbought territory which could foreshadow a correction.  Gold prices reached oversold level earlier in the week. Positive momentum on gold prices is decelerating as the MACD (moving average convergence divergence) histogram is printing in the black with a declining trajectory which points to consolidation.

The Fed’s Favored Inflation Gauge Hit 2%

The US commerce department on Thursday reported that core personal income expenditures, which is the Feds favored gauge of inflation, hit 2% for the 3^rd time in 2018.  This level would mean interest rates would need to climb to 2% to create a neutral policy.  The year over year rate was 1.9% in June which means inflation is accelerating.  While gold prices rise to offset rising inflation, current inflation outside of the US is relatively subdued. This means that higher US inflation will likely be met with a rising dollar, which would generate headwinds for gold prices.  Separately, personal spending came in at 0.4% in July which match the June figures.  Personal income came in at 0.3% declining from 0.4% in June.  Wages increased by 6.7% which was down slightly from the June figures.  The savings rate also decline, which makes sense given the uptick in spending.