Gold Price Prediction – Gold Risk Premium Dwindles as Riskier Asset Rally

Gold prices edged lower on Wednesday and continue to trade sideways. Prices appear to be turning over, as concerns over the coronavirus subside. The dollar surged higher breaking out to fresh 4-month highs which are generating headwinds for gold prices. US yields moved higher and riskier assets gained traction taking the risk premium out of gold prices. Household debt surged to a 13-year high, as consumers continue to buy on credit.

 

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Technical Analysis

 

Gold prices traded sideways to lower hovering just below resistance near the 10-day moving at 1,569.  Prices feel like they are turning over and forming a topping pattern. Additional resistance is seen near the February highs at 1,592 and then the January highs at 1,611. Target support is seen near the 50-day moving average at 1,530.

Short term momentum has turned negative as the fast stochastic generated a crossover sell signal.  The movement is choppy which likely means that gold is going to consolidate. The RSI slid sideways to lower and is hovering in the middle of the neutral range and reflects consolidation. The MACD histogram is printing in the red with a downward to flattening trajectory which also points to consolidation.

Household debt surged in 2019, according to the New York Federal Reserve. Total household debt balances rose by $601 billion last year, topping $14 trillion for the first time. The last time the growth was that large was 2007, when household debt rose by just over $1 trillion. Housing debt now accounts for $9.95 billion of the total balance. Balances for auto loans and credit cards both increased by $57 billion for the year, according to the Fed.