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David Becker

Gold prices moved lower consolidating for the second consecutive session after hitting a fresh 8-year high on Wednesday. For the week gold prices where higher by 1.25%.  The dollar moved lower on Friday following a softer than expected US PPI report. The 10-year US treasury yield dropped sharply declining below 57% but rebounded later in the session to close above 62-basis points. Fear that COVID continues to spread through the United States, is weighing on future growth prospects and deteriorating inflation.

 

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Technical Analysis

 

Gold prices consolidated on Friday after hitting fresh 8-year highs on Wednesday. Prices are now poised to test target resistance near the August 2011 highs at $1,921. Support is seen near the 10-day moving average at 1,786 and additional support is seen near the 50-day moving average at 1,738. Short term momentum has turned negative. The current reading on the fast stochastic is 80, down from 89 on and is just above the overbought trigger level of 80 which could foreshadow a correction. Medium-term momentum remains positive as the MACD (moving average convergence divergence) histogram prints in the black but the upward movement is decelerating which points to consolidation.

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US PPI Unexpectedly Declines

The US producer price index (PPI) dropped 0.2% last month after rebounding 0.4% in May. Year over year through the 12-months ending June, the PPI declined 0.8%, matching May’s decrease. Expectations were for a 0.4% rise in June and a 0.2% fall in May. Excluding the volatile food, energy producers’ prices rose by 0.3% in June. The core PPI dropped 0.4% on a year-on-year basis in May, which was the largest annual decrease since 2013.

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