Gold Price Prediction – Prices Form Bear Flag Pattern as Yields Rise

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.

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.