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Gold Price Prediction – Gold Trade Sideways as US Yields Tumble

Weak German IFO helps buoy gold prices
David Becker
Gold Bars and Dollar

Gold prices moved higher but remained in a relatively tight trading range after holding support levels on Tuesday. Stronger than expected US home sales buoyed the dollar, which continued to move higher on Wednesday. Most of the gains in the greenback came at the expense of the Euro which traded under pressure following a softer than expected German IFO survey. US yields tumbled on Wednesday in conjunction with German yields, but this did not seem to put downward pressure on the dollar.

Technical Analysis

Gold prices traded sideways moving slightly higher on Wednesday, following Tuesday’s dip. Prices appear to be forming a bear flag pattern after breaking down last week below support near the 1,284 level. Short term resistance is seen near the 10-day moving average at 1,282. Additional resistance is seen near an upward sloping trend line that comes in near 1,284. Support is seen near an upward sloping trend line that comes in near 1,260.  Short term momentum has turned positive as the fast stochastic generated a crossover buy signal. The signal occurred as the fast stochastic is printing a reading of 14, which is well below the oversold trigger level of 20 on the fast stochastic which could foreshadow a correction. Medium term negative momentum is decelerating as the MACD (moving average convergence divergence) histogram is printing in the red with a rising trajectory which points to consolidation.

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The German IFO Index Was Weaker than Expected

Germany received another round of softer than expected information. IFO reported weaker than expected German business confidence for April. The IFO headline number fell to 99.2 versus expectations of 99.9.  Future expectations declined to 95.2 versus a forecasted estimate that it would come in at 96.1, while current assessment fell 103.3 versus expectations that it would come in at 103.5.  France also experienced weaker than expected data as its April manufacturing confidence fell to 101 versus expectations of 102.

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