Gold Price Prediction – Prices Rally Nearly 5% as Risk Assets Surge

Gold prices surged higher on Tuesday rising more than 4.75%, following up on Monday robust rally. This comes despite little movement in the dollar index which consolidated. Riskier assets gain traction across the spectrum with stock rising significantly as it appears that the Senate is close to a bill. US yields moved higher across the curve following news that the senate was on the verge of passing a rescue bill. Purchasing managers survey across Europe and the US were horrible, pointing to a major contraction.

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Technical Analysis

Gold prices surged higher on Tuesday, rallying 4.75%, as investors piled into the yellow metal. Target resistance on the yellow metal is seen near the March highs at 1,700. Support is seen near the 10-day moving average at 1,542. Short term momentum has turned positive as the fast stochastic generated a crossover buy signal. The fats stochastic surged from a level of 13 last week to 42, which reflects accelerating positive momentum. Medium-term negative momentum is decelerating as the MACD (moving average convergence divergence) histogram is printing in the red with rising trajectory which points to consolidation.

EU PMI’s are Showing Contraction

The headline eurozone manufacturing PMI came in at 44.8 versus expectation that it would fall to 39.0 but the services PMI came in at 28.4 versus expectations of 39.5 pushing the composite to 31.4 versus expectations of 38.8.  Both Germany and France showed a similar scenario in services coming in less than expected and manufacturing holding up.