Gold Price Prediction – Prices Break out to Fresh 7-Year Highs

Gold prices broke out, to fresh 7-year highs as concerns over declining growth do to the coronavirus buoyed the yellow metal. The rally in gold comes despite a surge in the US dollar to fresh multi-year highs. The 10-year US yield is trading near the low end of its 5-year range and poised to break down. Gold prices have been negatively correlated to gold prices and a breakdown would be a confirmation of a further rally in the yellow metal. Gold has historically been negatively correlated to the US dollar. During the past month, this relationship has broken down. A potential catalyst that could drive yields lower is a slump in US markets. This could begin following Apple’s warning about the risk to its Q1 revenue guidance due to the coronavirus.

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Technical Analysis

Gold prices broke out closing at a fresh 7-year high and poised to continue to climb. Prices closed above 1,600 and are poised to test the January highs at 1,611. A close above that level would lead to a test of the 2013 high at 1,696. Support on the yellow metal is seen near the 10-day moving average at 1,574.

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 crossed above the zero-index level, which is also a buy signal. The MACD histogram is printing in the black with an upward sloping trajectory which points to higher prices.

Both the RSI (relative strength index) and the fast stochastic are accelerating higher pointing to accelerating positive momentum. The current reading on the fast stochastic is 84, above the overbought trigger level of 80 which could foreshadow a correction.