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Gold Price Prediction – Prices Slide as Risk Appetite Improves

Better than expected ISM manufacturing weighs on gold prices
David Becker

Gold prices moved lower on Monday, as risk appetite improved despite reports of the continued spread of the coronavirus throughout the world. The virus is an unknown which could reduced economic growth in Asia and spread throughout the rest of the globe. As of Monday, no US airlines were flying into China. The US yields backed up slightly allow for a stronger dollar which paved the way for lower gold prices. The US ISM manufacturing report expanded in January which was the highest level since July.

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Technical Analysis

 

Gold prices moved lower on Monday reversing most of Friday’s gains. Support is seen near the 20-day moving averaged at 1,564. Price action remains in a cup and saucer continuation pattern. This is generally a pause that refreshes higher. Resistance is seen near the January highs at 1,611. Medium-term momentum is flat to negative MACD (moving average convergence divergence) index is fail to make a crossover buy signal, and is now sliding lower. The MACD histogram is printing near the zero-index level with a declining trajectory which points to consolidation and lower prices. The relative strength index (RSI) is moving higher reflecting accelerating positive momentum. Short term momentum is positive as the fast stochastic generated a crossover buy signal and continues to accelerate higher.

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ISM Manufacturing is Stronger than Expected

The Institute for Supply Management reported that US national factory activity increased to a reading of 50.9 last month, the highest level since July, from an upwardly revised 47.8 in December. This represents expansion. Expectations were for the index to rise to 48.5 in January from the previously reported 47.2 in December. The new orders sub-index jumped to 52.0 last month, the highest since May, from a revised 47.6 in December. The ISM’s factory employment index rose to 46.6 last month from a revised reading of 45.2 in December, suggesting manufacturing payrolls could remain weak.

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