Gold Price Prediction – Prices Consolidate Following Mixed Data

The gold prices continued to trade sideways ahead of Friday’s employment report. The dollar moved lower as U.S. Treasury yields declined. ADP private payrolls came in softer than expected which initially weighed on U.S. yields, but a stronger than expected ISM manufacturing report, helped buoy the greenback and cap the upward momentum in gold.

Tecnical analysis

Gold prices edged higher and are consolidating in a tight range. Resistance is seen near the August highs at  1,831. Support is seen near the 10-day moving average of 1,800. Prices are overbought as the fast stochastic is printing a reading of 84, above the overbought trigger level of 80, which could foreshadow a correction.  Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This buy signal 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).

U.S. manufacturing activity unexpectedly picked up in August amid strong order growth, but a measure of factory employment dropped to a nine-month low. The ISM said its index of national factory activity inched up to 59.9 last month from a reading of 59.5 in July. A reading above 50 indicates expansion in manufacturing, which accounts for 11.9% of the U.S. economy. Economists polled by Reuters had forecast the index falling to 58.6. The ISM survey’s forward-looking new orders sub-index rebounded to a reading of 66.7. The survey’s measure of prices paid by manufacturers fell to an eight-month low of 79.4 from a reading of 85.7 in July. This measure has dropped from a record 92.1 in June.

Jobs Data Disappoints

According to ADP and Macro-Economic Advisors, the ADP National Employment Report showed that private payrolls increased by 374,000 jobs last month after rising 326,000 in July. Expectations had been for the ADP report to show private payrolls increased by 613,000 jobs. Expectations for the government number that is expected to be released on Friday is that nonfarm payrolls likely increased by 728,000 jobs last month after rising 943,000 in July