Gold Price Prediction – Prices Fall as the Yield Curve Flattens

Gold prices broke down, sliding through trend line support. The dollar whipsawed following weaker than expected Chicago PMI data and strong inflation rhetoric from Fed Chair Jerome Powell. Powell, in a statement, said the Fed will accelerate its bond purchase program, which could set the Fed up for a rate hike as early as May.  Yields were mixed, which flattened the curve. The two-year yield continued to rise while the 10-year sold off as a safe haven following the recent news on COVID.

Technical Analysis

Gold prices broke down through trend line support which his now resistance at , is seen near an upward sloping trend line that comes in near 1785, which coincides with the 50-day moving average. Support is seen near the November lows at 17,58. Medium-term momentum has turned negative as the MACD (moving average convergence divergence index) generated a crossover sell signal. This scenario 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. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. Prices are oversold as the fast stochastic is printing a reading of 4, below the oversold trigger level of 20.

The Chicago PMI fell to 61.8 in November from 68.4 in the prior month. It is the lowest reading since February.  Expectations were for a 69% reading. Tomorrow, the Institute of supply management will release its national PMI index. Expectations are for a 61 reading following 60.8 in October.