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David Becker
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Gold prices moved lower on Friday after testing resistance but finishing the week up 1.3%. The dollar moved higher in tandem with U.S. Treasury yields following a stronger than expected U.S. Inflation report. More substantial inflation will eventually force the Federal Reserve to change their tune on interest rates but current levels are unlikely to force their hand.

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Technical analysis

Gold prices moved lower after failing to recapture resistance seen near the 50-day moving average at 1,761. Support is seen near the 10-day moving average at 1,727. Additional support is seen near the June lows at 1,670. Short-term momentum is decelerating as the fast stochastic is poised to generate a crossover sell signal. The current reading on the fast stochastic is 87, above the overbought trigger level which foreshadows 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 MACD histogram is printing in positive territory with an upward sloping trajectory which points to higher prices.

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U.S. Producer Prices Surge in March

U.S. producer prices increased more than expected in March, notching up a 9-1/2 year high. According to the Labor Department, the producer price index rose 1.0% in March after increasing 0.5% in February. In the 12 months through March, the PPI surged 4.2%. That was the most significant year-on-year rise since September 2011 and followed a 2.8% advance in February. Expectations had been for a 0.5% increase in March and a rise of 3.8% year-on-year.

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