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Gold Price Prediction – Prices Consolidate Despite Strong European PMI Data

Rebounding US yields cap gold prices
David Becker
Gold daily chart, April 02, 2019

Gold prices traded sideways on Wednesday. Initially, prices moved higher as the dollar lost ground following stronger than expected EU PMI services and composite numbers. The dollar further declined following a softer than expected US ADP private employment report and a weaker than expected ISM services figure. Despite the softer than expected economic numbers, US interest rates moved higher led by a rebound in the 10-year yield back above 2.5%.

Technical Analysis

Gold prices continued to have a difficult time gaining traction. Prices made an attempt to push higher making a higher high and a higher low, but the range was muted and prices were unable to take out Monday’s highe. Short term resistance on the yellow metal is seen near the 10-day moving average at 1,302. Support is seen near and upward sloping trend line that connects the lows in January to the lows in March and comes in near 1,285. The 10-day moving average recently crossed below the 50-day moving average which means that a short term down trend is now in place.

Medium-term momentum remains negative. The MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices and accelerating negative momentum.

Prices are oversold. The fast stochastic is printing a reading of 12, below the oversold trigger level of 20 which could foreshadow a correction. The fast stochastic also generated a crossover buy signal, which means that short term negative momentum is fading.

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The EU reports stronger than expected PMI Data

The March EU services and PMI reading came in stronger than expected.  The EU services PMI was reported at 53.3 compared to expectations of a rise to 52.7. The compositive PMI hit a level of 51.6 compared to 51.3 expected. Both beat expectations and provide some lift to EU yields. Most of the improvement came from France.  Italy and Spain also showed strong improvements in the services sector which help buoy the composite readings improving to 51.5 for Italy and 55.4 for Spain.

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