Gold Price Prediction – Prices Drop but Hold Support

Gold prices tumbled moving to the bottom end of its recent trading range and hovering just above support levels.  Prices were on the defensive as traders reacted to rising US yields which buoyed the dollar against the Euro. The weaker Euro weighed on the yellow metal, making gold more expensive in currencies other than the greenback. The People’s Bank of China reduced their reserve requirements easing monetary policy in an effort to spur on the Chinese economy.

Technical Analysis

Gold prices tumbled more 1.3% declining $16 per ounce to the bottom end of its recent trading range. Support is seen near an upward sloping trend line that comes in near 1,184.  Resistance is seen near the 10-day moving average which was former support at 1,194.  Additional resistance on they yellow metal is seen near a downward sloping trend line that comes in near 1,208. Momentum has quickly reversed and 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). The MACD histogram is printing in the red with a declining trajectory. The fast stochastic generated a crossover sell signal in the middle of the neutral range which reflects accelerating negative momentum.

The PBOC Eases Reserve Requirements

The Peoples Bank of China (PBOC) over the weekend decreased the amount of money commercial banks needed to have in reserve. The goal was to help buoy lending, which in turn would raise economic growth. The PBOC cut its reserve requirement for the fourth time in 2018 dropping them by 100-basis points. This would free up approximately 1.2 trillion in Chinese capital which should flow into businesses.  Chinese authorities also announced that total foreign reserve held by the country dropped to $3.08 trillion yen down 200 billion.