Gold Price Prediction – Gold Tumbles to Support as Risk Off Trade Perpetuates

Gold prices moved southbound, tumbling down to support levels as the risk off trade gained traction allowing the dollar to gain strength. Since gold is priced in dollars, a stronger greenback generated headwinds for the yellow metal.  This week, traders are expected the US to release both CPI and retail sales. A stronger than expected number would further buoy US yields which would increase the value of the dollar and potentially push gold prices lower.

Technical Analysis

Gold prices tumbled down to support level which is seen as an upward sloping trend line that comes in near 1,198. A break of trend line support, or a close below this level would lead to a test of the September lows at 1,180. Prices pushed through support near the 50-day moving average at 1,209, which is now seen as short-term resistance. Additional resistance is seen near the 20-day moving average at 1,224. Momentum is negative as the MACD (moving average convergence divergence) histogram is printing in the red with a declining trajectory which points to lower prices. The fast stochastic has tumbled moving lower which reflects accelerating negative momentum.  The current reading on the fast stochastic is 9, which is below the oversold trigger level of 20 and could foreshadow a correction.

The risk off trade continues but yields on US treasuries have been unable to break above the 3.25% level. This tells us that the selloff in riskier assets is a function of potential declining growth due to current rates than the feat that rates are going to continue to move higher making a dent in the value of equities.  Gold has been unable to gain ground despite an uptick in PPI, which is wholesale inflation. Trader’s expected CPI to come out at 2.5% year over year for October, above the Feds target of 2%. Wages are running at approximately 3.1% year over year.