Gold Price Prediction – Price Rebound Despite Rally in the Dollar

Gold prices rebound to support despite drop in German Industrial Production
David Becker
Fine gold bars and bullion

Gold prices rebounded from session lows moving back to resistance by the end of the North American trading session. The rebound in the yellow metal comes despite a rally in the US dollar. The dollar gained traction despite a selloff in US yields as yields in both European and the UK declined. The Bank of England sited softer than expected growth as a reason that rates would remain neutral for an extended period. Softer than expected German Industrial production weighed on the euro. Stronger than expected jobless claims buoyed the dollar.

Technical Analysis

Gold prices rebounded from session lows despite a rising dollar. Prices where unable to recapture resistance near the 10-day moving average which was former support near 1,311. Support is seen near the January lows at 1,280. 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 downward sloping trajectory which points to lower prices.

Initial claims tumbled 19,000 to 234,000 for the week ended February 2, according to the Labor Department. Claims jumped to 253,000 in the prior week, which was the highest reading since September 2017, amid layoffs in the service industry in California. Economists blamed that surge on a strike by teachers in California, a 35-day partial shutdown of the federal government.

German Reported Weak Industrial Production

Germany reported weak December Industrial production.  IP contracted by 0.4% compared to expectations that it would increase 0.8% month over month.  This dragged the year over year rate down to -3.9% versus -3.4% expected.  This is just the latest in a series of disappointing data out of Germany.

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