Gold Price Prediction – Prices Rise Despite a Gain in the Dollar

Gold prices moved higher on Monday, but liquidity was weak due to the US Martin Luther King Day holiday. All eyes will be on the ECB meeting this week, but investors will also need to absorb and interest rate decisions from both the Bank of Japan and the Bank of Canada. Gold prices generally underperform when the dollar is rising, and the greenback is enjoying a rise in value against most currencies except the Euro. The rally in the Euro is helping to buoy gold prices. US yields remain unchanged and continue to consolidate in a tight range.

Technicals

Gold prices are forming a cup and handle which is a continuation pattern which is a pause that refreshes higher. Short term support on the yellow metal is seen near the 10-day moving average at 1,494. Resistance on gold prices is seen near the January highs at 1,611. Momentum is neutral. Short term momentum is negative to flat as the oscillator is grinding lower, with a flattening trajectory. The RSI (relative strength index) is moving sideways reflects neutral momentum.  The MACD histogram is flat, and the MACD line is hovering near the MACD signal line with a flat trajectory that points to consolidation.

The ECB

The goal of the ECB is to convince the markets that they have a plan on how to tackle flat to lower inflation. There are lots of theories but there is no clarity as to why inflation remains so low. The ECB is not sure why negative rates have not buoyed prices. While assets have increased in value, for example, stocks are at record levels, standard headline assets have yet to rise.