Gold Price Prediction – Prices Continue to Ease as Yields Surge

Gold prices continued to ease on Wednesday as the dollar continued to rise and the US yields increased. Strong yields generally negatively impact gold as they are a safe-haven alternative to the yellow metal. Since early January, the US 10-year yield hit the highest levels following a better than expected ADP private payroll report. The employment picture bounced back in January as companies added new jobs.

Trade gold with FXTM

Technical analysis

Gold prices eased lower after breaking down on Tuesday and testing support near an upward sloping trend line that comes in near $1,823. A close below this level would lead to a test of the January lows at 1,802. This trend line has been strong support and prices are likely to bounce at this level. Resistance on the yellow metal is seen near the 20-day moving average at 1,851. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. Medium-term momentum has turned negative as 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).

Employment Gains Beat Estimates

The ADP private payrolls increased by 174,000 jobs in January after dropping by 78,000 in December. Expectations had been for a rebound by 49,000 in January. The hiring gains were broad, though the pace was half of the 347,000 monthly average job growth in the last six months of 2020. The stronger than expected numbers helped buoy the 10-year US yield by 5-basis points, hitting the highest levels since the beginning of January.