Gold Price Prediction – Prices Rally but Do Not Break Out Following Weak PPI

Gold prices moved higher but were unable to break out and ran into resistance near a downward sloping trend line. Prices remain range-bound and have had a difficult time gaining traction. The dollar moved higher generating some headwinds for gold. US yields were nearly unchanged despite a much softer than expected US PPI report.

Trade gold with FXTM

Technical Analysis

Gold prices moved higher but continue to trade sideways as the weekly pattern forms a bull flag continuation pattern. Despite a risk-off trading environment over the past 2-trading sessions gold has not been able to break out. Resistance is seen near a downward sloping trend line that comes in near 1,720. Support is seen near an upward sloping trend line that comes in near 1,680. A break of this tight channel either way is likely to generate a new trend. Short term momentum is neutral as the fast stochastic continues to whipsaw generating consecutive buy and sell signal as the trajectory moves sideways. This reflects consolidation. Medium-term momentum is negative as the MACD (moving average convergence divergence) histogram prints in the red with a downward sloping trajectory which points to lower prices.

US PPI Tumbles

The Labor Department reported that producer prices fell more than expected in April, leading to the largest annual decline since 2015. The producer price index tumbled 1.3% last month after slipping 0.2% in March. Year over year through April, the PPI decreased 1.2%. That was the biggest decline since November 2015 and followed a 0.7% increase in March. Expectations were for the PPI to fall 0.5% in April and falling 0.2% on a year-on-year basis.