Gold Price Prediction – Prices Slide Through Support

David Becker
Comex Gold

Gold prices edged lower as US yields continued to move higher, following stronger than expected US data that was released at the end of last week. Stronger than expected Chinese retail Sales and Industrial production also buoyed global yields weighing on gold prices. Despite the UK facing issue with the Brexit, the safe haven attractiveness of gold seems to have dissipated.

Technical analysis

Gold prices edged lower on Monday, easing through support levels near the 50-day moving average at 1,282, which is now seen as resistance. Target support on the yellow metal is now seen near the 200-day moving average at 1,247. Momentum has recently turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occur as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line. The MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices, and accelerating negative momentum. The fast stochastic has tumbled from overbought territory and generated a crossover sell signal, which reflects accelerating negative momentum which points to lower prices for the yellow metal. Prices appear to be toppy, and will need to consolidate otherwise there is a lot of downside.

Stronger than Expected Chinese Retail Sales Weigh on Gold Prices

December retail sales rose 8.2% year over year in December versus expectations they would increase by 8.1%. Industrial production also came in stronger than expected which helped buoy riskier assets. Industrial production rose by 5.7% year over year in December versus expectations that output would increase by 5.3% year over year.  The combination also saw growth rise, in line with estimate. Chinese GDP grew 6.4% year over year, as expected but down from 6.5% in Q3.  Policymakers continue to add stimulus, both monetary and fiscal.  That tells us that the economic outlook remains worrisome.

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