Gold Price Prediction – Gold Tumbles Through Support as the Dollar Gains Ground

Gold prices tumbled through trend line support, a day after the dollar surged versus the Euro following the ECB meeting.  Eurozone inflation was confirmed below 2%, which coincides with the ECB’s dovish bent. The IMF projects strong U.S. growth which buoyed the greenback and undermined the value of the yellow metal. Prices sliced through trend line support near 1,289 which is now seen as resistance. Target support is seen near the December lows at 1,236. Momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal.

Eurozone May HICP inflation was confirmed

Eurozone May HICP inflation was confirmed at 1.9% year over year, as expected. The breakdown confirmed that a large part of the uptick was due to higher energy prices, which rose 6.1% year over year, versus just 2.6% year over year in the previous month. However, services price inflation also bounced back – to 1.6% year over year from 1.0% year over year in April, confirming that the April number was held artificially lower by base effects from the earlier timing of Easter, which saw prices for package holidays falling earlier than in 2017.

IMF projects strong U.S. growth near term

IMF projects strong U.S. growth near term, in its annual check up on the economy. The fund did praise some parts of the tax reform measures, and sees stronger growth this year. But it warned of darker clouds ahead. It noted the rising risks to global activity from the increase in debt that could potentially push up inflation and firm the dollar. The report noted that fiscal stimulus at a time the economy is growing will elevate risks. An upward surprise on inflation could force the FOMC into more aggressive action.

ECB policymakers quibbled over rate hike timing

ECB policymakers quibbled over rate hike timing wording in the statement, as well as the framing of the QE optionality after the taper and completion. Some members wanted to signal a rate hike as early as mid-2019, rather than “through the summer,” while others wished to keep the door ajar for an extension of bond purchases.