Gold Price Prediction – Prices are Buoyed by Dollar Weakness

Gold prices perked up slightly on Wednesday as the dollar continued to trade heavily. Tuesday’s softer than expected U.S. CPI weighed on U.S. Treasury yields, keeping the yellow metal in a  sideways trading range. China reported disappointing August retail sales, which rose by 2.5% year-over-year, down from 8.5% in July and missing the 7.0% median expectations. The spread of the Delta variant seemed to weigh on retail spending and generated headwinds for riskier assets. The theme in the market is that the Fed will likely put off tapering its bond purchase program until at least November. With China showing poor economic results there is little impetus for the Fed to pull the trigger on less accommodation now. This situation is weighing on the dollar and helping to buoy the yellow metal.

Technical analysis

Gold prices consolidated and edged higher but remain rangebound. Prices remained below resistance seen near the 10-day moving average, at 1,804. Target resistance is seen near the September highs at 1,834. Support is seen near the 50-day moving average at 1,798. Target support is seen near the August lows at 1,672. Short-term momentum has reversed and turned positive as the fast stochastic generated a crossover buy signal. The fast stochastic has rebounded out of the oversold territory, which reflects accelerating positive momentum.

Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover signal. This sell signal occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line).