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David Becker
Gold daily chart, July 18, 2019

 

Gold prices reversed course on Friday, after hitting a fresh 6-year high, as traders took profits ahead of the weekend. Gold and silver prices have benefited throughout the week as investors turned to gold as the safest currency. The dollar moved lower on Thursday but rebounded slightly on Friday paving the way for traders to lighten their load. University of Michigan sentiment came in slightly less than e3xpected but remains at elevated levels.

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Technical Analysis

Gold prices eased on Friday, after surging to a fresh 6-year high on Thursday. Resistance is now the Friday highs at 1,448. Support on the yellow metal is seen near the 10-day moving average at 1,414. Momentum has turned neutral. The MACD (moving average convergence divergence) index was poised to generate a crossover buy signal, but that was rejected. Short term momentum remains positive as the fast stochastic continued to accelerate. The RSI (relative strength index) turned lower, which reflects a capping out of accelerating momentum.

Sentiment Remains Buoyed

The University of Michigan’s preliminary consumer sentiment index rose to 98.4, from 98.2 in June. Expectations was for July consumer sentiment to reach 98.5. This comes ahead of the Federal Open Market Committee scheduled for July 30-31. Strong consumer data has largely held up in face of an expected reduction in interest rates which has made it more difficult to justify policy easing. The Federal Reserve usually does not cut interest rates when economic conditions show few signs of a recession. The market is beginning to price in a potential 50-basis point rate cut. This comes despite a stronger than expected retail sales report which was released earlier this week. President Trump continues to state that the Fed has it wrong and they need to cut rates more.

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