Gold Price Prediction – Prices Consolidate Ahead of BOJ Meeting

Gold prices moved sideways on Monday following Friday’s stronger than expected US GDP report and this weeks central bank meetings. The Fed is widely expected to cut interest rates this week, but traders will need to keep and eye on the Bank of Japan which is scheduled to meet on Tuesday.

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Technical Analysis

Gold prices edged higher on Monday ahead of several central bank monetary policy meetings scheduled for this week. Prices eased above the 10-day moving average at 1,422, which is now seen as short term support. Further support is seen near an upward sloping trend line that comes in near 1,414. Resistance is seen near the July highs at 1,452. Short term momentum is negative as the fast stochastic is prints in the red with a downward sloping trajectory. The current reading on the fast stochastic is 48, which is in the middle of the neutral range and reflects consolidation. Medium term momentum remains negative as the MACD (moving average convergence divergence) histogram is printing in the red with a downward sloping trajectory which points to consolidation.

The Bank of Japan Meets Tuesday

The Bank of Japan meets on Tuesday and expected to keep rates unchanged. No new action is expected from the central bank, but  there is some speculation that Governor Kuroda could reinforce the forward guidance.  Inflation remains subdued by  June Japanese retail sales held in a bit better than expected.  Sales were flat in June though economists expected around a 0.3% decline. The sales tax will be hiked in October, which could put additional pressure on sales.

Former Federal Reserve Chair Janet Yellen said she supports a 25-basis-point cut in the central bank’s benchmark interest rate, as the global economy weakens and inflation in the United States is lower.The U.S. central bank is widely expected to cut interest rates by a quarter point on Wednesday for the first time in more than a decade. That’s despite recent economic data indicating that the U.S. economy is still going strong. GDP rose by 2.1% Friday which was more than expected.