Gold Price Prediction – Prices Edge Higher Following U.S. PPI Report

Gold prices continued to trend higher after breaking out on Friday.  Despite the greenback holding steady, the decline in U.S. yields buoyed the yellow metal. The solid U.S. PPI report released on Tuesday by the Labor Department showed that part of wholesale inflation is decelerating. Heavy buing in U.S. yields, given the Fed’s stance that rate will remain unchanged while quantitative easing is unwound, will likely continue to buoy gold prices.

Technical analysis

Gold prices edged higher but the trend is upward sloping. Support is seen near the breakout level which is the September highs at 1813. Target resistance is seen near the June highs at 1916. The 10-day moving average has crossed above the 50-day moving average which means a short-term up trend is now in place. Short-term momentum has turned negative as prices are overbought. The fast stochastic generates a crossover sell signal. Prices are overbought as the fast stochastic is printing a reading of 94, well above the overbought trigger level of 80. Medium-term momentum has also turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This scenario occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD line). The MACD histogram is printing in positive territory with an upward sloping trajectory which points to higher prices.

PPI Rise but Core Misses Expectations

The government’s producer price index rose 0.6% for the month, in line with expectations. The monthly pace was faster than the 0.5% increase in September. Excluding food and energy the PPI increased 0.4% month over month, slightly below the 0.5% estimate but an elevated pace from September’s 0.1% gain. On a year-over-year basis, core producer prices increased 6.2%. The year-over-year records go back to November 2010.