Gold Price Prediction – Prices Drop but Hold Support Following Weak Chinese Data

Gold prices moved lower on Thursday, as the dollar move higher. Stronger than expected US data buoyed US yields, putting upward pressure on the greenback which paved the way for lower gold prices. Softer than expected economic data in Japan and China were also the catalyst for a stronger greenback.

Technical Analysis

Gold prices dropped on Thursday but held support levels which are an upward sloping trend line that connects the lows in November to the lows in January and comes in near 1,314. Additional support is seen near the 50-day moving average at 1,298. Resistance on the yellow metal is seen near the 10-day moving average at 1,326. 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. Short term momentum is also negative as the fast stochastic continues its downward path after generating a crossover sell signal.

Japan Reported Soft Data and So Did China

Japan reported softer than expected industrial output as weak retail sales.  January industrial output declined to 3.7%.  Expectations were for a 2.5% drop.  Japan also reported that retail saleswhich fell 2.3% in January.   The Chinese official manufacturing PMI fellto 49.2 from 49.5 January.  This is a three-year low.

US GDP Rose More than Expected

U.S. GDP increased more than expected rising 2.6% according to a first estimate from the Commerce Department. Economists had expected a gain of 2.2% after a 3.4 percent rise in the third quarter. Growth was helped by a 2.8% rise in consumer spending along with increased nonresidential fixed investment, exports, private inventory investment, and federal government spending.