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David Becker
Gold

Gold prices eased on Tuesday following the Labor Departments report on wholesale prices.  Gold prices broke out above resistance on Friday following a softer than expected employment report but has since ease and forming a bull flag continuation pattern.

Technical Analysis

Gold prices eased for a second consecutive trading session on Tuesday, but appears to be forming a bull flag pattern which is a pause that refreshes higher.  The dollar edge higher following the slightly stronger than expected headline PPI report, paving the way for lower gold prices. Momentum is flat as reflected by the fast stochastic, but the oscillator is printing a reading of 86, above the overbought trigger level of 80 which could foreshadow a correction. Momentum is decelerating as the MACD histogram is printing in the black with a flat trajectory which points to consolidation.

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PPI Was Stronger than Expected

Wholesale prices came in stronger than expected according to the US labor department. The Producer price index for final demand edged up 0.1% last month after jumping 0.6% in October. On a year over year basis the PPI rose 2.5%, slowing from October’s 2.9% surge. Expectations were for a forecast the PPI to be unchanged in November and rise 2.5% on a year-on-year basis. Core producer price pressures that excludes food, energy and trade services increased 0.3% last month. The so-called core PPI gained 0.2% in October. In the 12 months through November, the core PPI increased 2.8%, matching October’s gain. Wholesale food prices shot up 1.3% last month, driven by gains in the cost of chicken eggs and fresh and dry vegetables. Food prices rebounded 1.0% in October.

Wholesale energy prices tumbled 5.0%, the largest drop since September 2015. Gasoline prices plunged 14.0 percent, the biggest decline since February 2016, after surging 7.6% in the prior month. Overall, the cost of wholesale goods fell 0.4% in November, the largest drop since May 2017, after shooting up 0.6 % in October. Core goods rose 0.3% last month after being unchanged in October.

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