Gold Price Prediction – Gold Trades Sideways, a Stronger Dollar Weighs on Prices

The Chinese Yuan hits a 11-year low
David Becker
Gold Bars

Gold prices were rangebound on Monday, and volume completely tanked during the North American time zone as markets were close in the US due to the Labor Day holiday. Geopolitics and safe-haven status will continue to drive gold prices in conjunction with the dollar. The dollar broke out on Friday, against most major currencies as the EUR/USD tumbled. Yields in Germany are falling at a rate that is faster than the decline in US rates, which is pushing the yield differential in favor of the US dollar. A rising dollar will not help the Trump administration with its trade war against the Chinese. The yuan moved lower on Monday with offshore rates hitting 11-year highs at 7.17.

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Technical Analysis

Gold prices moved sideways on Monday and liquidity was light during the US holiday weekend.  Short-term resistance is seen near the August highs at $1,555. Support on the yellow metal is seen near the 10-day moving average at 1,521. Short term momentum has turned negative as the fast stochastic generated a crossover sell signal. Medium-term momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in the red with a declining trajectory which points to lower prices.

Trump Will Be Upset

It will only be a matter of time until President Trump is tweeting about the strength of the US dollar and the terrible mess the Fed is causing. Trump wants the Fed to significantly cut rates so the dollar loses value and trade partners do not get the benefit of a weaker currency. If the Chinese yuan continues to fall, Chinese importers will need fewer dollars to get the prices they need for their products. This makes an increase in tariffs mute.

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