Gold Price Prediction – Prices Rose as the Dollar Slid and U.S. Yields Dropped

Gold prices moved higher on Wednesday following a sharper than expected U.S. PPI report. This large rise in wholesale prices was offset by comments from Jerome Powell, who said that the economy needs to improve more before the central bank changes its accommodative policy. U.S. yields tumbled following the Fed Chairs’ comments. These move-in yields weigh on the U.S. dollar, paving the way for higher gold prices.

Technical analysis

Gold prices moved higher and are trading below resistance near the 50-day moving average at 1,837. Support is seen near the 10-day moving average at 1,800.  Short-term momentum has flip-flopped, turning positive as the fast stochastic generated a crossover buy signal. Prices are overbought as the fast stochastic is printing a reading of 92, above the overbought trigger level of 80, which could foreshadow a correction. Medium-term momentum has shifted positively as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in positive territory with an upward sloping trajectory which points to higher prices.

U.S. PPI Rose More than Expected

Wholesale prices for June rose more than expected. The producer price index, which measures what companies get for the goods they produce, increased 1% from May and jumped 7.3% on a year-over-year basis. That marked the second month in a row in which the PPI set a record for a data series that goes back to 2010. Expectations were for a 0.6% monthly increase. Core PPI, which excludes energy and food prices, increased 0.5%, in line with estimates.