Gold Price Prediction – Prices Edge Lower Despite Soft Inflation Figures

Gold prices edged lower back to trend line support despite a softer than expected inflation gauge, which was offset by solid US consumer spending.  The dollar gained traction as riskier assets where mixed as most traders focused on the G20 meeting in Argentina. President Trump and President Xi are scheduled to meeting and discuss trade issues.

Technical Analysis

Gold prices edged lower on Friday, slipping back toward support near the 20-day moving average at 1,219. Additional support is seen near the 50-day moving average at 1,215.  A break through this level would lead to a test of an upward sloping trend line that connects the highs in August to the highs in October that comes in near 1,205. Short-term momentum remains positive as the fast stochastic generated a crossover buy signal. The MACD (moving average convergence divergence) shows momentum is moving average as the index is printing in the red with a slightly declining trajectory which points to consolidation.

Inflation was Low but Spending Moved Higher

Consumer spending increased 0.6% last month according to the Commerce Department. Data for September was revised down to show spending rising 0.2% instead of the previously reported 0.4% gain. Expectations where for consumer spending to rise by 0.4% in October. When adjusted for inflation, consumer spending advanced 0.4%, also the biggest gain in seven months. Data also shows moderation in business spending on equipment, a deterioration in the trade deficit. In October, spending on goods surged 0.5% after gaining 0.1% in September.

Inflation actually edge lower according to a gauge that is preferred by the Fed. The personal consumption expenditures price index excluding the volatile food and energy components edged up 0.1% after increasing 0.2% in September. PCE year over year dropped to 1.8% compared to September’s reading of 1.9% year over year. Last month, personal income increased 0.5%, the largest gain since January, after rising 0.2% in September. Wages rose 0.3% in October.