Gold Price Prediction – Prices Consolidate Following Core PCE Report

Gold prices attempted to move higher but were unable to gain any ground after testing key resistance.  Despite weaker than expected consumer spending, U.S. Treasury yields rose to put upward pressure on the dollar, which capped the upward movements in gold prices. Consumer spending was flat for the month, missing expectations, while personal income declined 2%, less than the expected 2.7% drop.

Technical analysis

Gold prices moved higher on Friday and continue to form a bear flag continuation pattern. Prices remain above support near the and upward sloping trend line that comes in near $1,762. A break of this level would lead to a test of target support near an upward sloping trend line that comes in near $1,731.  Resistance is seen near the 100-day moving average at 1,793.  The 10-day moving average has crossed below the 100-day moving average, meaning that a short-term downtrend is now in place. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. Prices are oversold. The current reading on the fast stochastic is 11, below the oversold trigger level of 20 which could foreshadow a correction. Medium-term momentum has turned negative as the MACD (moving average convergence divergence) as the MACD (moving average convergence divergence) index generated a crossover sell signal. The MACD histogram is printing in negative territory with a rising trajectory which points to consolidation.

Inflation Rises In Line with Expectations

Inflation rose in line with expectations rising 3.4% in May, the fastest increase since the early 1990. Expectations were for year over year inflation would rise by 3.4%. The Commerce Department released the Personal Consumption Expenditures report along with consumer spending and consumer income. The core PCE index rose 0.5% for the month, which actually was below the 0.6% estimate. Including volatile food and energy prices, the PCE index rose 3.9% for the year and 0.4% for the month.