David Becker
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Gold prices moved sideways, testing resistance and continuing to form a bear flag pattern. The dollar also was nearly unchanged, which provided no clear direction for the yellow metal. U.S. yields moved higher with the 2-year yield rising more than 10-year generating a flattening of the yield curve, which is also not positive for gold prices. In addition, flash PMI services came in higher than expected which put upward pressure on yields.

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Technical analysis

Gold prices were nearly unchanged on Wednesday, and continue to form a bear flag continuation pattern. This is a pause that refreshes lower. Prices remain above support near the and upward sloping trend line that comes in near $1,757. A break of this level would lead to a test of target support near an upward sloping trend line that comes in near $1,730.  Resistance is seen near the 100-day moving average at 1,794.  The 10-day moving average has crossed below the 50-day moving average which means that a short-term downtrend is now in place. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. Prices are oversold. The current reading on the fast stochastic is 15, 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) as the MACD (moving average convergence divergence) index generated a crossover sell signal. The MACD histogram is printing in negative territory with a rising trajectory which points to consolidation.



Flash PMI is Stronger than Expected

IHS Markit reported its flash U.S. manufacturing PMI rose to a reading of 62.6 in June. That was the highest since October 2009 and followed a final reading of 62.1 in May. Expectations were for the index to slip to 61.5. The strength in manufacturing bolsters expectations for double-digit growth in the Q2.

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