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David Becker

Gold prices broke down on Friday and continued to trend lower following the US Thanksgiving Holiday.  The decline comes despite a falling US dollar and declining US yields. Worse than expected US consumer spending helped reduce yields. Most of the losses in the yellow metal were due to a technical breakdown

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Technical analysis

Gold prices continued to break down on Friday as the downtrend accelerated. Support is seen near the July lows at 1,756.  Resistance is seen near the 10-day moving average at 1,842. Short-term momentum has turned negative. The current reading on the fast stochastic is 6, well below the oversold trigger level of 20, which could foreshadow a correction. Medium-term momentum remains negative as the MACD (moving average convergence divergence) histogram prints in the red with a declining trajectory which points to lower prices.

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Consumer Spending Declines

Consumer spending moderated in October, According to the US Commerce Department. Spending rose 0.5% after a revised 1.2% gain in the prior month. This is the smallest gain since April. Expectations were for a 0.4% rise. Incomes sank 0.7% in October as government programs ended. Expectations were for a 0.5% drop. Inflation slowed as well. The Personal Consumption Expenditures (PCE) Index, the Feds favored gauge for inflation slowed to a 1.2% annual rate down from a 1.4% gain in September. The core PC which removes food and energy increased at a 1.3% annual rate, down from 1.5% in the prior month. The savings rate dipped to 13.6% from 14.3%. Wages and salaries rose 0.7% in the prior month.

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