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David Becker

Gold prices edged lower, slipping through trend line support and poised to test lower levels. The dollar moved lower, but long-term US treasury yields moved higher which continued to weigh on the yellow metal. Weaker than expected US housing starts, due to rising lumber prices capped the upward movement in yields which helped gold prices form a doji day.

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Technical analysis

Gold prices edged lower creeping below trend line support near $1,789 and poised to test the November lows at 1,764. A break of this level would lead to a test of the June lows at 1,667.  Resistance is seen near the 10-day moving average at 1,814. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. Prices are oversold. The current reading on the fast stochastic is 8, well below the oversold trigger level of 20 which could foreshadow a correction. Medium-term momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line the 9-day moving average of the MACD line).

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US Housing Starts Disappoint

US Housing Starts fell more than expected in January amid soaring lumber prices. Housing starts decreased 6.0% to an annual rate of 1.580 million units last month, according to the Commerce Department. Expectations had been for starts to drop to a rate of 1.658 million units in January. Homebuilding fell 2.3% on a year-on-year basis. Building permits for future homebuilding shot up 10.4% to a rate of 1.881 million units in January. Permits typically lead starts by one to two months. Single-family homebuilding, the largest share of the housing market, tumbled 12.2% to annual rate of 1.162 million units.

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