Gold Price Prediction – Prices Break Out as Yields Pull Back

Gold prices broke out above trend line resistance and are poised to test higher prices. The dollar rebounded and closed up on the day, but that failed to dent the rally in the yellow metal. Yields moved lower in the wake of a weaker than expected Dallas Fed survey that showed manufacturing eased in Texas. According to Fed Chair Jerome Powell and Treasury Secretary Janet Yellen, inflation is expected to remain elevated for longer.

Technical analysis

Gold prices broke out above trend line resistance which is now supported at 1,792. Additional support is seen near the 50-day moving average at 1,781. Resistance is seen near the September highs at 1,830. The 10-day moving average is poised to cross above the 50-day moving average which means a short-term uptrend is about to be in place. Short-term momentum turned positive as the fast stochastic generated a crossover buy signal. Prices are overbought. The fast stochastic is printing a reading of 89, above the overbought trigger level of 80, foreshadowing a correction. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This 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). The MACD histogram is printing in positive territory with an upward sloping trajectory which points to higher prices.

Prices Will Remain Higher for Longer

Federal Reserve Chair Powell and Secretary of State Janet Yellen separately discussed that recent disruptions in the supply chain and tight labor market conditions would buoy price pressures for longer.  Yellen sees the higher inflation readings persisting through Q2 next year.