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David Becker
Gold Bars and Dollar

Gold prices surged higher on Friday, as the euro rebounded and the dollar lost ground. The Euro surged higher on Friday and this comes despite a dovish ECB and worse than expected growth in Germany following softer than expected PMI data. This also countered the stronger than expected jobless claims and PMI data released in the US which showed the US is still the best house on the block.

Technical Analysis

Gold prices surged higher on Friday ripping through the 20-day moving average at 1,286 which his now seen as short term support. Resistance on the yellow metal is seen near the June 2018 highs at 1,310. Short term momentum has turned positive as the fast stochastic generated a crossover buy signal which reflects accelerating positive momentum. Negative momentum is decelerating as the MACD (moving average convergence divergence) histogram is printing in the red with an upward sloping trajectory. The MACD looks like is it poised to generate a crossover buy signal.

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The ECB Sees the Risks to the Downside; Germany Cuts Its Growth Forecast

The ECB left rates unchanged and the commentary from Draghi was dovish. Its hard to see given the current economic backdrop that the ECB raised rates in 2019. While the risks are now to the downside, the ECB will wait until their staff projections are released and then make a decision.

German government cut its 2019 growth forecast to 1.0%.  This is even more pessimistic than the recent IMF revision for Germany, which cut its 2019 growth forecast to 1.3% from 1.9% previously.  The German PMI, which came out prior to the ECB decision dropped below the 50 handle which reflects contraction. IFO reported January German business confidence on Friday at 99.1 vs. 100.7 expected and was the lowest in almost three years.   A larger than expected drop in the expectations component to 94.2 was the culprit.

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