Gold Price Prediction – Prices Drop Sharply but are Now Oversold

Gold prices tumbled again on Wednesday breaking down and headed toward target support near the December 2016 lows at 1,120.  Resistance is seen near former support now resistance near 1,204. Stronger than expected retail sales helped buoy  the dollar paving the way for lower gold prices.  The dollar has been the beneficiary of the geopolitical unrest which first hammered the Turkish Lira but has spread to decline in the Indian Rupee and the Chinese Yuan.  Momentum is 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).  Prices are oversold. The relative strength index (RSI) which is a momentum oscillator is printing a reading of 21, well below the oversold trigger level of 30 which could foreshadow a correction. The RSI has hit a low of 20 twice in the past 3-years and in each instance prices rebounded.

Retail Sales Were Stronger than Expected

The U.S.  Commerce Department reported that U.S. Retail Sales rose by 0.5% in July. Economists had forecast that headline retail sales would increase 0.1%  Retail sales increased 6.4% from the prior July. Retail Sales was revised lower in June climbing by 0.2% in June compared to the previously reported 0.5%.  Ex-autos and gasoline retail sales were up 0.5%.

Industrial Production Rose but Missed Expectations

U.S. industrial production rose by 0.1% in  July. According to the Federal Reserve, U.S. Industrial Production increased by 0.1% in July shy of economists expectations that IP would increase by 0.3%.  The small increase follows a 1% rise in IP in June. The Federal Reserve reported that manufacturing output increased 0.3% which was in line with expectations. Motor vehicle production rose 0.9% and machinery expanded 0.6%.