Gold Price Prediction – Prices Drop Sharply in Tandem with the Dollar as Jobless Claims Surge

It appears that gold and the dollar have been moving in lockstep which is generally not the case since gold is priced in dollars. The softer than expected US jobless claims put downward pressure on US yields which in turn weighed on the dollar and generated headwinds for gold. Riskier assets declined for the first time this week, which has also seemed to create resistance for gold.

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Technical analysis

Gold prices dropped sharply declining approximately1.7%. Prices slipped through support which is seen as short-term resistance near the 10-day moving average at $1,706.  Support on gold prices is seen near the mid-April lows at 1,662. Target resistance above the 10-day moving average is the April high at $1,747. After that level, gold could rally to $1,921.

Short term momentum has turned negative as the fast stochastic generated a crossover sell. The current reading on the fast stochastic is 62, coming down from 81 two days ago which was above the overbought trigger level of 80, which reflects accelerating negative momentum. 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 trading crosses below the 9-day moving average of the MACD line.

US Jobless Claims Drop Sharply

UY Jobless claims surged by 3.84 million last week according to Labor Department. This compares to expectations that initial claims would rise by 3.5 million. Jobless claims for the week ended April 25 came in at the lowest level since March 21 but bring the rolling six-week total to 30.3 million as part of the worst employment crisis in U.S. history. Claims hit a record 6.87 million for the week of March 28 and have declined each week since then. Last week’s initially reported figure was revised up by 15,000 to 4.4 million.