Gold Price Prediction – Prices Rebound on Stronger Dollar and Higher Chinese Inflation

Prices are forming a bull flag pattern
David Becker
Gold Falls Amid Risk Appetite Due US-Mexico Trade Deal
Gold Falls Amid Risk Appetite Due US-Mexico Trade Deal

Gold prices rebounded on Wednesday, as the dollar rose against most major currencies. This comes despite lower US yields which fell following subdued US inflation data. The softer than exected US inflation was offset by stronger than expected Chinese inflation data that was buoyed by pork prices. The markes have taken some of the safe haven bid out of gold which ensued following the announcement that the Trump administration would levy a tariff on Mexico.

Technical Analysis

Gold prices moved higher on Wednesday bouncing near support at the 10-day moving average at 1,323. Additional support is seen near the 50-day moving average at 1,292. Prices have appeared to form a bull flag pattern which is a pause that refreshes higher. Short term momentum remains negative as the fast stochastic continues to edge lower following a recent crossover sell signal in overbought territory. The current reading on the fast stochastic is 74, below the overbought trigger level of 80. Medium term positive momentum is decelerating. The MACD (moving average convergence divergence) histogram is printing in the black with a declining trajectory which points to consolidation.

Chinese CPI Rises

Chinese CPI moved higher to 2.7% from 2.5%, which was slightly higher than expected.  The increase in consumer prices was driven by port prices due to the African swine flu.  Food prices jumped 7.2%. May producer prices were 0.6% above a year ago, down from 0.9% in April.  The average through April was 0.5%.  Separately, China reported lending figures that were in line with expectations.  Japan reported May producer prices and April core machine orders.  PPI rose 0.7% year over year which was in line with expectations, while machine orders rose 2.5% year over year compared to expectations they would fall by 5.3%.  The orders data was unusual and one of the only signs of expansion for Japan.

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