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Gold Price Prediction – Prices Consolidate Despite Rising Geopolitical Risks

The Pound drops a Johnson looks to suspend parliament
David Becker
Gold daily chart, August 28, 2019

Gold prices remained buoyed on Wednesday despite a rising dollar and falling US yields. German yields continued to fall at a faster pace than US rates. The Bund hit an all-time low on Wednesday, dropping to -73-basis points. Additionally, the long end of the US curve continues to fall. The US 30-year interest rate dropped to an all-time low, hitting a level of 1.90%. The pound was under pressure on Wednesday, buoying gold prices, as UK Prime Minister Johnson is reportedly seeking an extended suspension of Parliament ahead of the Brexit deadline.

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Technical Analysis

Gold prices consolidating hovering near a 6-year high. Short-term resistance is seen near $1,560. Support on the yellow metal is seen near the 10-day moving average at 1,517. Short term momentum is positive but choppy. 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 MACD histogram is printing in the black with a rising trajectory which points to higher prices.

 

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Pound Tumbles

The Pound dropped sharply on Wednesday as UK Prime Minister Johnson is reportedly seeking an extended suspension of Parliament ahead of the Brexit deadline.  Under the plan, Parliament would be suspended from September 12 until the Queen’s Speech October 14.  All legislative matters would be suspended. The geopolitical risk helped buoy the yellow metal despite a rising dollar. Additionally, the benchmark 10-year Treasury note yield in the US, which influences everything from business loans to home mortgages, was at 1.45% Wednesday. That’s below the 2-year yield of 1.5%, and the move has been signaling recession.

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