Gold Price Prediction – Prices Break out Following Soft US CPI

Gold prices surged higher driven by demand to enter into a safe haven currency, following a softer than expected US CPI report. Yields edge lower allow the dollar to ease paving the way for higher gold prices.  President Donald Trump was on the tape on Thursday stating that he believe the Federal Reserve was being reckless and increasing interest rates was unacceptable.

Technical Analysis

Gold prices broke out of a 2-month range hitting highs not seen since early August.  Prices surged above resistance which is now short term support near a downward sloping trend line at 1,212.  Additional support is seen near the 10-day moving average at 1,197.  Resistance on the yellow metal is seen near the July highs at 1,265.  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 the black with an upward sloping trajectory which points to higher prices.

CPI Rose Less than Expected

U.S. consumer prices rose less than expected in September, as underlying inflation pressures appeared to cool slightly. The CPI index rose 0.1% compared to expectations that it would increase by 0.2% and following Augusts 0.2% increase. The year over year rate increased to 2.3% after rising by 2.7% in August. Expectations were for a 2.7% year over year increase.  On a year over year basis, core CPI increased by 2.2%. Economists had forecast both overall and core CPI climbing 0.2 percent in September. With CPI coming in less than expected, a Fed increase in December could be called into question. Trump continues to want the Fed to leave rates unchanged.  It will be difficult for the Fed to keep rates unchanged following last months decision.