Gold Price Prediction – Prices Fall on Strong ISM Manufacturing Report

Gold prices attempted to recapture resistance following a strong drop on Friday that pushed through trend line support. US Treasury yields move higher following a stronger than expected US ISM manufacturing report. The upward movement in US yields helped buoy the US dollar which weighed on the yellow metal.  The price paid component hit the highest level in the last decade which also helped buoy US treasury yields.

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Technical analysis

Gold prices attempted to recapture resistance but were unable to gain traction after breaking through trend line support seen near 1,765. Target support is seen near the June lows at 1,670.  Resistance is seen near former support: the breakdown level at 1,765 and then the 10-day moving average at  10-day moving average at 1,778. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. Prices are now oversold as the relative strength index (RSI) is printing a reading of 28, below the oversold trigger level of 30. Medium-term momentum flip-flopped and turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. The MACD histogram is printing in negative territory with a downward sloping trajectory which points to lower prices.

Manufacturing Rise More than Expected

The Institute of Supply Management reported on Monday that their headline Purchasing Managers Index (PMI) was 60.8, an increase of 2.1 from 58.7 the previous month. Today’s headline number was above expectations of 58.8 percent. The New Orders Index registered 64.8 percent, up 3.7 percentage points from the January reading of 61.1 percent. This means that future-looking manufacturing is positive. The Prices Index registered 86 percent, up 3.9 percentage points than the January reading of 82.1 percent.