Gold Price Prediction – Prices Consolidate as Riskier Asset Rebound

Gold prices moved Monday but remain rangebound, unable to generate momentum. The dollar whipsawed and then moved lower, but the change weakness in the dollar was unable to buoy the yellow metal. Yields moved higher as riskier assets gain traction following a story that discussed the expansion in high yield bond purchases.

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Technical analysis

Gold prices edged lower and remain above trend line support which is now 1,730. Additional support is seen near the 10-day moving average at 1,711 Target support is seen near the 50-day moving average at $1,711. Short term momentum has turned negative as the fast stochastic generated a crossover sell. The current reading on the fast stochastic is 77, down from 86 which was above the overbought trigger level of 80 which could foreshadow a correction. Medium-term 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 Fed is Expanding its Bond Purchases

The Federal Reserve is expanding its corporate credit purchases to now buy individual corporate bonds, on top of the exchange-traded funds it already is purchasing, the central bank announced Monday. As part of a continuing effort to support market functioning and ease credit conditions, the Fed added functions to its Secondary Market Corporate Credit Facility.