Gold Price Prediction – Prices Drop as Yields Rise on Energy Inflation Fears

Gold prices dropped on Wednesday, declining as the dollar gained traction. The rise in oil prices put upward pressure on US yields which in turn buoyed the greenback which paved the way for lower gold prices. Bond prices were also under pressure hitting resistance level and then moving lower. Fed chair Powell was on the hill again testifying in front of the House of Representatives. The heart of the discussion focused on the Fed’s Balance sheet.

Technical  Analysis

Gold prices turned lower, breaking through short-term support which is now seen as resistance near the 10-day moving average at 1,326. The next level of target support on gold prices is seen near the 50-day moving average at 1,297. Medium term momentum has turned negative as the MACD (moving average convergence divergence) index recently 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 is printing in the red with a downward sloping trajectory which points to lower prices.

Powell Say that Balance Sheet Sales are Nearly Complete

Powell said that we are close to agreeing on a plan which would the be the end of the process. The Fed is reducing the bond holdings by allowing a maximum of $50 billion in proceeds to roll off each month and reinvesting the rest. Powell added that he expects the reduction to end sometime later this year. Since the process began in October 2017, the amount of Treasurys and mortgage-backed securities the Fed holds has been reduced by about $448 billion to $3.8 trillion. Powell also addresses the inflation target. He said that the Fed is not considering raising its inflation target. The central bank considers 2% a healthy level for inflation but has fallen short of that target through much of the recovery.v