Gold Price Prediction – Prices Slip Following Weak US GDP

In fact, the dollar has declined for the 4-consecutive trading session which would generally buy the yellow metal. The decline came as US yields edged lower.

US Q1 GDP came out softer than expected to decline by 4.8% compared to expectations that growth would decline by 4%. Riskier assets continue to rise as Gilad announced that its coronavirus drug showed some positive results. With the Q1 contracting, and the US showing a decline of 26-million jobs in the last 5-weeks, the Q2 will likely be sharply in the red and likely provide a second consecutive contracting quarter which would officially generate a recession. The Fed kept rates unchanged and said they would do whatever it takes to get the US economy back on track.

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Technical analysis

Gold prices continued to decline despite a drop in the dollar easing for the third consecutive trading session. Prices slipped through support which is seen as short-term resistance near the 10-day moving average at $1,708.  Target resistance is the April high at $1,747. After that level, gold could rally to $1,921. Support on gold prices is seen near the mid-April lows at 1,662.

Short term momentum has turned negative as the fast stochastic generated a crossover sell. The current reading on the fast stochastic is 62, coming down from 81 two days ago which was above the overbought trigger level of 80, which reflects accelerating negative momentum. The MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day trading crosses below the 9-day moving average of the MACD line.

US GDP Contracted Sharply

The US Commerce Department reported that the US economy shrank at its fastest pace since the last recession in the Q1 due to the coronavirus pandemic. GDP contracted at a rate of 4.8% in the first three months of 2020. The decline marks the beginning of a near-certain recession, which takes two consecutive negative growth rates. This is the biggest drop in quarterly economic output since the fourth quarter of 2008.