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David Becker
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Comex Gold

Gold prices rebounded on Friday recapturing support that was former resistance despite a stronger dollar. The greenback gained traction despite declining US yields as soft data in Europe continued to weigh on the euro.

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Technical Analysis

Gold prices moved higher on Friday, forming a bull flag pattern which is a pause that refreshes higher. Gold prices recaptured support which was former resistance near the 5-day moving average at 1,311. Additional support is seen near the 20-day moving average at 1,300. Medium term momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line. The MACD histogram is printing in the red with a flat to declining trajectory which points to consolidation. The trajectory of the fast stochastics is flattening. The momentum oscillator has drop sharply from overbought territory and is printing a reading of 67, which is on the upper end of the neutral range and reflects consolidation.

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Economic Data in Europe Remains Soft

The economic data out of the EMU remain soft and was overall in line with expectations.  December industrial output slumped 0.8%. The median forecast was for a 0.4% rise.  However, news from France was better.  French industrial production rose 0.8% compared to expectations that it would increase by 0.6%. was expected to rise 0.6%.  This recoups most of the weakness since in November.  For its part, Germany reported a considerably smaller trade surplus at 13.9 billion euro in December versus  20.4 billion euros in November, but more importantly, imports and exports recovered smartly.  After falling 0.3% in November, exports rose 1.5%.  Imports rose 1.2% after falling 1.3% in November.  Thursday’s weaker than expected German Industrial Production shows that Europe’s largest economy is in the process of decelerating.

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