Gold Price Prediction – Prices Slip Following ECB Decision

Gold prices moved lower on Thursday following bullish comments from the ECB and a softer than expected German IFO figure. German business sentiment continued to worsen in July, according to the Ifo Institute. The Ifo business-climate index fell to 95.7 points in July, down from a revised 97.5 points in June. Expectations were for a reading of 97.0 points. Companies’ expectations fell to 92.2 points in July from a revised 94.0 points in June.

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Technical Analysis

Gold prices eased on Thursday as the dollar continued to gain traction. Prices slipped throug the 10-day moving average at 1,421, which is now seen as short term resistance. Current support is seen near an upward sloping trend line that comes in near 1,414. Short term momentum is negative as the fast stochastic is prints in the red with a downward sloping trajectory. The current reading on the fast stochastic is 51, which is in the middle of the neutral range and reflects consolidation. Medium term momentum remains negative as the MACD (moving average convergence divergence) histogram is printing in the red with a downward sloping trajectory which points to consolidation. The relative strength index is also testing support and a breakdown would reflect accelerating negative momentum.

The ECB is Dovish

The European Central Bank signaled it is preparing to cut short-term interest rates and potentialpossibly restart its giant bond-buying program. The ECB kept interest rates unchanged but will likely pull the trigger when the central bank meets next in September. The ECB has given the Federal Reserve the opportunity to be first among the world’s biggest central banks to reduce policy rates in this cycle. The Fed is widely expected to lower interest rates for the first time in over a decade when it meets at the end of July. The ECB said in a statement Thursday that it expects to keep its key interest rate at its current level of minus 0.4% or lower through the first half of 2020, a clear signal that it is planning a rate cut. The economic outlook is softening especially in manufacturing, ECB President Mario Draghi said at a press conference.