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David Becker
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.

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.


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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