Gold Price Prediction – Prices Consolidate as Traders Await the ECB

Gold prices barely moved on Monday as traders await the ECB decision on monetary policy scheduled to be released on Thursday 7/25/19. While most expect the ECB to keep rates unchanged, they are likely going to pave the way to lower rates when the governing council next meets on September 12, 2019. The dollar hovered in a very tight range along with US and European yields which moved sideways. There was news on Monday that the US congress is poised to reach a deal on allowing the debt ceiling to be raised.

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Technical analysis

Gold prices were neaerly unchanged on Monday, generating a $7 per ounce range. Suport on the yellow metal is seen near the 10-day moving average at 1,417. Resistance is seen near the July highs at 1,444. Short term momentum has turned negative as the fast stochastic generated a crossover sell signal. The current reading on the fast stochastic is 73, which is on the upper end of the neutral range. Medium term momentum remains negative as the MACD (moving average convergence divergence) histogram prints in the red with a declining trajectory which points to consolidation.

The ECB is on Deck

All eyes will be on the European Central Bank as the governing body will meet this Thursday to determine monetary policy.  The main issue is whether it merely prepares the market for accommodative policy or acts.  ECB officials have made a case to acting sooner rather than later.  The new staff economic forecasts that will be available in September, which lead one to believe that the committee will kick the can down the road, and hold off on easing. This could lead to a higher Euro especially if the Fed cuts rates and guides the market to further easing. This would stifle EU exports as the Euro gets stronger.  This confluence of events would help gold prices break out to fresh highs.