Gold Price Prediction – Prices Rebound on Core CPI Decelleration

Gold prices rebounded sharply on Wednesday. The deceleration in consumer prices was a welcome sign for gold prices as the dollar eased and yields declined. Sharp gains in Labor buoyed yields last week, but Wednesday CPI data showed that consumer prices might be peaking. On Thursday the Labor Department will report PPI, which will provide traders with some insight into wholesale prices.

Technical analysis

Gold prices continued to rebound sharply on Wednesday but are still lower on the week. Target support is seen near the March lows at 1,677. Resistance is seen near former support at the June lows at 1,755. Short-term momentum has turned positive as the fast stochastic generated crossover buy signal.  Medium-term momentum has turned negative as the MACD (moving average convergence divergence) 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 9-day moving average of the MACD line). The MACD histogram is printing in negative territory with a downward sloping trajectory which points to lower prices.

Core CPI Rose More than Expected

On Wednesday, the Labor Department reported that the consumer price index rose 5.4% in July from a year earlier, in line with June’s figure and matching expectations. The government said CPI increased 0.5% on a month-over-month basis, matching a consensus forecast. Core CPI only rose by 0.3% which was lower than forecast and below the June increase of 0.9%. The decline in CPI could mean that price increases are transitory as the Fed has been claiming.