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Gold Price Prediction – Price Bounce but a Rebound is Likely Short Lived

By:
David Becker
Published: Aug 20, 2018, 14:37 UTC

Gold prices attempted to move higher in early north American trade, but stopped short of hitting resistance levels.  Gold has benefited as positive dollar

Comex Gold

Gold prices attempted to move higher in early north American trade, but stopped short of hitting resistance levels.  Gold has benefited as positive dollar momentum has stalled and issues related to emerging markets have been pushed to the side. This comes despite news that Venezuelan has devaluated their currency, helping to ease some of the rising inflation that has hit the country.  While this has been a temporary respite the rise in the dollar will likely continue following Thursday’s central bank symposium.

Technical Analysis

Gold prices have rebounded since hitting an August low of 1,160 and are poised to test their first level of target resistance near the 10-day moving average near 1,195. A close above this level would lead to a push to test the July 2017 lows which were former support and now target resistance at 1,204.  A breakdown below the 1,160 level would lead to a test of the 1,120 level. Short-term prices are no longer oversold. The fast stochastic has rebounded above the oversold trigger level and is now printing a reading of 32, above the oversold trigger level of 20. Negative momentum is decelerating as the MACD (moving average convergence divergence) histogram is printing in the red with a rising trajectory which reflects consolidation.

The Dollar Will Likely Continue to Strengthen

The issue for gold prices is that they are priced in U.S. dollars. The dollar has been strengthening as the Fed is normalizing while other countries around the globe continue to have accommodative momentum policy.  Last week’s better than expected U.S. retail sales has buoyed forecasts for Q3 US growth. This will likely be touched on during Thursday’s central bank symposium, which will provide another leg up for the US dollar. If this is the case, traders should expect gold prices to head lower and test support levels.  Traders will also need to pay attention to the Fed’s August meeting minutes which will be released later this week.

About the Author

David Becker focuses his attention on various consulting and portfolio management activities at Fortuity LLC, where he currently provides oversight for a multimillion-dollar portfolio consisting of commodities, debt, equities, real estate, and more.

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