Gold Price Prediction – Prices Rally as Yields Drop

Gold prices moved higher as the dollar consolidated and gained traction and U.S. yields declined. The dollar’s decline has coincided with the market having second thoughts about the timing of the Fed’s first hike.  With a delay due to the accelerating spread of the coronavirus and U.S. treasury yields sliding, gold prices have been given a reprieve.

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Technical analysis

Gold prices moved higher on Tuesday bouncing from support. Prices remain above support near the 50-day moving average seen near 1,751, and the 10-day moving average near 1,754.  Target resistance on the yellow metal is seen near the February highs at 1,855. The 10-day moving average has crossed above the 50-day moving average which means that a short-term up trend is now in place. Short-term momentum reversed and turned negative as the fast stochastic generated a crossover sell signal. The current reading on the fast stochastic is 89, above the overbought trigger level of 80. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. The MACD histogram is printing in positive territory with a declining trajectory which points to consolidation.

The dollar Eases in Tandem with Rate Decline

The dollar’s decline has coincided with the market view of a future hike. He 10-year yield has given back gains and the 1-year forward-forward is now pricing in 56 basis points of tightening, projecting earlier rate hikes.  The Fed believes rates will remain unchanged about a year longer than the market and the recent change in the markets tune has weighed on the greenback.