Gold Price Prediction – Prices Edge Higher but are Overbought

Gold prices continued to move higher on Tuesday, as the dollar eased, and yield rebound. European yields rebounded more sharply than US yields, paving the way for higher gold prices. The Fed was on the tape on Tuesday. Fed Vice Chair Richard Clarida said that he is taking the inverted curve seriously. The message is the Fed will cut rates if US economic contraction begins to occur.

Technical Analysis

Gold prices continued to rise, edging closer to resistance near the 2019 highs in February at 1,347. Support on the yellow metal is seen near the 10-day moving average at 1,292. The 10-day moving average crossed above the 50-day moving average which means that a short term up trend is now in place. Short term momentum is positive as the fast stochastic continued to rise. The current reading on the fast stochastic is 94 above the overbought trigger level of 80 which could foreshadow a correction. The RSI (relative strength index) moved higher and is printing a reading of 72, which is above the overbought trigger level of 70 and could foreshadow a correction. Medium term momentum remains positive. The MACD (moving average convergence divergence) histogram is printing in the black with an upward sloping trajectory which points to higher prices.

Fed Commentary is Dovish

Federal Reserve Vice Chairman Richard Clarida said Tuesday that the Fed needs to evaluate the inverted yield curve and take it seriously. Clarida said that an inverted yield curve that percists need to be constantly analyzed as it has forecasted the last few recession. The yield on the 10-year Treasury note is now below that of the 3-month bill, inverting part of the so-called yield curve. The 10-year yield is close to 2.15% compared to the 3-month yield which is closer to 2.30%. Clarida didn’t clarify how long the yield curve would have to stay inverted for him to take seriously. Separately, Fed Chairman Jerome Powell said in remarks Tuesday that the central bank is closely monitoring the recent escalation in trade tensions and that it would respond if the US economy began to contract.