Gold Price Prediction – Prices Consolidate Ahead of Powell Jackson Hole Speach

David Becker

Gold prices moved lower on Thursday and consolidated in a tight range as the dollar initially moved higher. This came despite slightly better than expected EU PMI Flash numbers. The Jackson Hole symposium started on Thursday and although there were no speeches, which appears clear is that the Fed is unlikely to ease rates substantially. The market is still pricing in another rate cut in September, but there is now a 10% chance of nothing being done.

Technical Analysis

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Technical Analysis

Gold prices moved sideways and appear to be forming a topping pattern. Prices are trapped between the August highs at 1,534 and last week’s lows at 1,479. Short term support is seen near the 10-day moving average at 1,506. Short term momentum remains negative as the fast stochastic recently generated a crossover sell signal. Medium-term momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line. The MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices.

EU PMI’s are Better than Expected

The Eurozone released flash PMI’s for August that came out better than expected.  German manufacturing rose to 43.6 from 43.2, but it is the eighth-month of contraction.  Levels below 50 are considered contraction. The service sector continues to hold up better, though it slipped to 54.4 from 54.5.  The composite rose to 51.4 from 50.5.  Orders and hiring continued to contract. The manufacturing sector rose in France to 51.0 from 49.7 to return to growth.  Services rebounded as well, to 53.3 from 52.6, which is a new high since last November.  The combination lifted the composite to 52.7 from 51.9, which matches the year’s high. The EU aggregate reading for manufacturing PMI rose to 47.0 form 46.5 while the service PMI nudged up to 53.4 from 53.2.  The composite rose to 51.8 from 51.1.

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