Gold Price Prediction – Prices Consolidate Which Could be a Pause that Refreshes

Gold prices were nearly unchanged trading in a relatively tight range as riskier assets stabilized. This occurred as the People’s Bank of China set the dollar’s reference rate above 7.0 for the first time in more than 10-years.  Expectations were for a lower value which helped calm market participants.  The signal was that the PBOC was stabilizing the yuan.  Additionally, China reported a contracting trade surplus which helped buoy the yellow metal.

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Technical Analysis

Gold prices stabilized and traded in a tight range following Wednesday’s surge. Resistance is now seen near the March 2013 highs at 1,616. Support is seen near the 10-day moving average at 1,450. Short term momentum is slowing as the fast stochastic is poised to generate a crossover sell signal. The fast stochastic accelerated higher and is now printing a reading of 94, well above the overbought trigger level of 80 which could foreshadow a correction. Medium-term momentum has also turned positive as the MACD (moving average convergence divergence) 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 gold prices.

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Chinese Exports Rose More than Expected

China reported a contracting trade surplus.  Exports increased by a stronger than expected 3.3% year over year, compared to expectations of a 1.3% decline.  Imports declined by 5.6% in July, less than the 7.4% drop in June and the 9% decline expected.  Exports to the US fell 6.5% year over year. China appears to be shifting its trade due to the US tariffs.  Exports to Europe rose 6.5% and 15.6% to other Asian countries. China reported that its reserves that moved lower in July to about $3.104 trillion from $3.119 trillion.