Gold Price Prediction – Prices Drop as Yields Surge

Gold prices moved lower on Thursday after whipsawing on Wednesday. The dollar was slightly higher against a basket of currencies but formed a doji day, a sign of indecision. U.S. Treasury yields moved higher in the wake of Wednesday’s Fed minutes. The meeting minutes imply that the Federal Reserve would be more aggressive in raising rates and unwinding their balance sheet, which buoyed yields and drove gold prices lower.

Technical Analysis

Gold prices declined on Thursday. Prices declined through support near the 10-day, 50-day and 200-day moving average. Resistance is seen near the 200-day moving average at 1,800.  Support on the yellow metal is seen near the December lows at 1,753. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. Medium-term momentum is about to turn negative as the MACD (moving average convergence divergence) index is poised to create a crossover sell signal. The MACD histogram is printing in negative territory with a downward sloping trajectory which points to lower prices.

ISM Services Decelerate

In December, the U.S. services sector lost momentum after hitting a record-high growth rate in November. The ISM Services Report purchasing managers index fell to 62.0 in December from 69.1 in November, below the 66.8 consensus forecast. The index signals that the U.S. services sector registered a broad-based expansion in December, but is decelerating.