Gold Price Prediction – Prices Edge Higher on Central Bank Action

Gold prices edged higher but remained rangebound as central banks from around the globe had monetary policy decisions. The easing of rates in China and the potential for a future decline in the UK help buoy the yellow metal.

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Technical Analysis

Gold prices edged higher slipping above former resistance which is now short term support near the 50-day moving average near 1,477. Additional support is seen near the 10-day moving average at 1,470. Momentum is decelerating. The rangebound nature of gold prices continues to build energy. Short term momentum recently turned positive as the fast stochastic generated a crossover buy signal. Medium-term momentum is positive as the MACD histogram prints in the black with an upward sloping trajectory which points to higher prices. Gold prices are poised to break one way or another, as volatility has hit the lowest levels of the year.

The PBOC continues to ease interest rates. The central bank provided the largest capital injection of $40 billion since January through its open market operations. Overnight rates came down more than 40 basis points overnight, while 7-day rates were 20 basis points lower. Bank of Japan kept rates steady at -0.10%, as expected.  It also kept its yield curve target and asset purchases unchanged. The Bank of England warned of mounting weakness in the British economy as it kept interest rates on hold despite two members of its monetary policy committee voting for an immediate cut. Sounding the alarm that economic growth would come close to unchanged in the Q4, the Bank’s monetary policy committee voted 7-2 to keep the official interest rate on hold at 0.75%.