Gold Price Prediction – Gold Whipsaws and Settles Higher as US Yields Rally

Gold prices whipsawed first moving higher, rising up to a fresh 6-month high before profit taking ensued, putting downward pressure on the yellow metal. Despite worse than expected private payrols reported on Wednesday by ADP and Macro Economic Advisors, US Yields moved lower, as riskier assets gained traction. The change in momentum in gold was mimicked by a change in momentum for US yields.

Technical Analysis

Gold prices whipsawed moving higher initially hitting a fresh 6-month high before traders took profits and pushed gold lower. Support on the yellow metal is seen near the 10-day moving average at 1,298. Additional support is seen near the 50-day moving average at 1,287. The 10-day moving average recently crossed above the 50-day moving average reflecting that a short term up trend is now in place.

Short term momentum is poised to turn negative as the fast stochastic is about to generate a crossover sell signal in overbought territory. The current reading on the fast stochastic is 89, which is above the overbought trigger level of 80 and could foreshadow a correction. Medium term momentum is positive as the MACD (moving average convergence) histogram is printing in the black with an upward sloping trajectory which points to higher prices.

US private job creation eased substantially in May. ADP and Macro Economic Advisors reported that companies added just 27,000 new positions during the month, well below expectations which was for an increase of 173,000. The reading was the worst since around the time the economic expansion began and the jobs market bottomed in March 2010. Since then, the private payrolls count has increased by 21.3 million. The prior month was revised lower to 270,000 and the average of the two months remains near a robust 150,000.

Most of the declines in job creatino came in small business with fewer than 50 employees, which reported a loss of 52,000 jobs, and in the goods-producing sector, which saw a decline of 43,000. Almost all of the small business loss came at firms with fewer than 20 employees, while the big loser in the goods sector was construction, where 36,000 positions were lost. Large companies withstood the slowdown, adding 68,000 jobs, while those with 50 to 499 employees contributed 11,000.