Gold Price Prediction – Prices Rebound Slightly But Momentum Remains Negative

Gold prices rebounded slightly on Monday following Friday’s swoon as traders rushed from the doors of a crowded trade. Prices rebounded on support levels but were unable to recapture resistance that the yellow metal sliced through on Friday. The 10-year yield hit a fresh all-time low of 1.03% on Monday. The US 10 year rebounded back to 1.12% by the end of the trading session. The dollar continued to get clobbered, with the DXY falling 0.66%, but this did not help the yellow metal surge. Generally, gold prices are negatively correlated to the 10-year yield but the correlation has broken down as gold drop in tandem with US yields. Chinese data continued to disappoint.

 

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Technical Analysis

Gold prices rebounded and held support near an upward sloping trend line that comes in near 1,586. Resistance is seen near the 20-day moving average at 1,605 and then the 5-day moving average at 1,611. Medium-term momentum has turned negative as the MACD (moving average convergence divergence) generated a crossover sell signal. The negative momentum from last Friday’s deluge will be hard to crack.  The fast stochastic is also accelerating lower which should weigh on gold prices.

 

Chinese ISM Data Comes in Very Weak

Chinese economic surveys were much worse than anyone could have expected. China’s February PMI composite tumbled to a fresh record low of 28.9, almost 10-index points below the low from the Great Financial Crisis. The services number dropped sharply as well record low 29.6 versus 54.1 in January. The sub comments were as bad as the headline figures. New Orders, exports and production fell below 30. The Caixin manufacturing PMI fell to 40.3 from 51.1.