Gold Price Prediction – Prices Continue to Consolidate as Riskier Assets Gain Traction

Gold prices moved sideways despite a falling dollar, as US yields moved higher and riskier assets gained traction. As traders continue to move money into riskier assets, the safe haven bid is declining, allowing money to flow out of the yellow metal. Hedge funds reduced their long positions in futures and options according to the latest commitment of traders report released for the date ending December 10, 2019. According to the CFTC managed money reduced long position in futures and options by 24K contracts while increasing short positions by 4K contracts. Open interest that is long futures and options outnumbers open interest that is short by 9 to 1, leaving the market vulnerable to a long liquidation.

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Technical Analysis

Gold prices attempted to move higher but continued to consolidate and was unable to push through resistance near the 50-day moving average near 1,478. Short term support is seen near the 10-day moving average at 1,470. Additional support on the yellow metal is seen near an upward sloping trend line that comes in near 1,462. Short term momentum has turned positive as the fast stochastic generated a crossover buy signal. The trajectory of the fast stochastic has slowed which points to consolidation. Medium-term momentum is positive as the MACD histogram prints in the black with a rising trajectory which points to higher prices.

Strong Chinese Data Buoys Riskier Assets

China’s November industrial production and retail sales came in stronger than expected helping to buoy riskier assets. Industrial output rose 6.2% from 4.7% in October compared to expectations of a 5% gain. Retail sales rose 8% from 7.2%. The better than expected data comes in the wake of a phase-one deal that could continue to help Chinese growth.