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David Becker

Gold prices tumbled nearly 4% on Tuesday as US yields shot higher following a larger than expected US PPI index. The dollar moved lower which helped gold prices from falling further. The US 10-year yield increased by 6-basis points, closing near the highest levels seen in the past month near 64-basis points.

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Technical analysis

Gold prices tumbled 4% after rallying 6% over the past 2-weeks. Prices sliced through short-term support, near the 10-day moving average, which is now seen as resistance at 2,001. Target support is seen near the 50-day moving average at 1,825. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. The current reading on the fast stochastic is 68. The move from overbought to neutral reflects accelerating negative momentum. Medium-term momentum has 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 above the MACD signal line (the 9-day moving average of the MACD line).

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Wholesale Prices Rise

The Labor Department reported that the producer price index increased 0.6%, driven by a surge in gasoline. That was the biggest gain since October 2018 and followed a 0.2% decline in June. On a year over year basis, the PPI dropped 0.4% after falling 0.8% in the 12 months through June. Expectations were for PPI to rise by 0.3% in July. Excluding the volatile food, producer prices increased 0.3% last month after a similar rise in June. On a year over year basis core PPI edged up 0.1%.

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