Gold Price Prediction – Prices Slip Ahead of Fed Meeting

Gold prices eased on Monday and continue to have a difficult time breaking out to new highs. The decline came despite a falling dollar which generally buoys gold prices. US yields moved higher ahead of the Fed meeting which is scheduled for later in the week. The ECB is also scheduled to meet, expectations are for a larger bond purchase program. The BOJ met on Monday and eliminated the cap on asset purchases.

Technical analysis

Gold prices consolidated and eased following a week where the price of the yellow metal rose approximately 2.5% hitting a 7-year high  The next level of target resistance is the April high at $1,747. After that level, gold could rally to $1,921. A break of this 2011 level would lift gold into blue sky territory. Short term momentum has turned negative as the fast stochastic generated a crossover sell. The current reading on the fast stochastic is 81, above the overbought trigger level of 80, which could foreshadow a correction. The MACD (moving average convergence divergence) index is sliding lower, reflecting decelerating positive momentum.

The BOJ Alters Target

The Bank of Japan eliminated its asset purchase limits in favor or buying whatever is needed.  This seems an admission than a policy shift as limits on bond-buying don’t make any sense under a policy of strict yield curve control.  The central bank revised down their inflation forecast for 2020 to a range of -0.7% to -0.3% from January’s range of +1.0% to +1.1%, while its GDP forecast was revised down to a range of -5.0% to -3.0% from the +0.8% to +1.1% outlined in January.