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Gold Price Prediction – Prices Drop as the Dollar Surge and Trades Capitulate

Gold prices drop as traders liquidate long positions
David Becker

Gold prices drop sharply in a sign of liquidation as the dollar surged and yields moved higher. Riskier assets moved higher; the markets hoped that the US political officials would calm the markets. For the week, gold prices had one of the worst weeks in history falling more than 9% and forming an outside week which is a reversal pattern.

 

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Gold prices dropped sharply on Friday, which appeared to be a liquidation. Prices earlier in the week attempted to break through the $1,700 per ounce level but were unable to gain traction and eventually turned over. There appears to be no place to hide.

Prices sliced through many levels of support but eventually found buyers near the 200-day moving average at 1,497 which coincides with an upward sloping trend line. Resistance is now seen near another upward sloping trend line that comes in near 1,550. Additional resistance is seen near the 10-day moving average at 1,579. Short term momentum is negative as the fast stochastic recently generated a crossover sell signal.

Medium-term momentum is 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). The MACD histogram sliced through the zero-index line which reflects accelerating negative momentum.

President Trump was on the tape on Friday. He is demanded that the Federal Reserve lower a key interest rate in response to the coronavirus crisis, a day after the Fed announced it would make up to a massive $1.5 trillion worth of short-term loans to support credit markets and assure liquidity. Unfortunately, lower rates will not get people to go on a cruise or go to a movie, only the decline in coronavirus infections will do this.

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