Gold Price Prediction – Prices Run into Resistance Despite Robust EU PMI Services Report

Gold prices continued to rebound on Wednesday but ran into resistance. After generating an outside day on Tuesday prices rose Wednesday following a stronger than expected EU PMI.  Support is seen near the June lows at 1,237. Resistance is seen near the 10-day moving average at 1,256. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. Negative momentum is decelerating as the MACD (moving average convergence divergence) is headed toward a crossover buy signal.

Eurozone services, composite PMIs unexpectedly revised higher

Eurozone services, composite PMIs unexpectedly revised higher. The Eurozone services reading was revised up to 55.2 from 55.0 reported initially and versus 53.8 in the previous month. That helped to lift the composite to 54.9, versus 54.8 in the preliminary number and 53.8 in the final May reading. So while growth in the manufacturing sector seems to have reached its limit and is slowing down, the services sector remains strong, which means the overall economy regained some traction at the end of a largely disappointing second quarter. Still, trade worries and political uncertainty coupled with capacity constraints continue to weigh on confidence and Markit reported that the trend in business optimism dipped to a 19 month low in June. So far though job creation continues at a solid pace, with employment rising across all of the countries covered.

Price pressures increased and rising input costs also fed through to higher selling prices, which suggests demand remains sufficiently strong for companies to pass on higher costs. Markit suggests survey data point to GDP rising by just over 0.5%, so despite the negative headline rates, GDP growth recovered again in Q2. At the same time cost pressures are likely to feed through to consumer prices in coming months and while the report backs the ECB’s decision to end QE, the pledge to keep rates on hold well into the second half of next year may have been premature.