Gold Price Prediction – Prices Stabilize at Gold is Oversold

Gold prices continue to head south on Tuesday, weighed on by a stronger dollar and higher US yields. Stronger than expected US new home sales helped buoy short-term yields which lifted the greenback and paved the way for lower gold prices.

Technical Analysis

Gold prices moved lower but formed a Doji day (or close to one) where open and the close were at the same level,  which reflects indecision. Resistance on the yellow metal is seen near the 50-day moving average at 1,300. Support is seen near the January low at 1,276, and then an upward sloping trend line that comes in near 1,243. Medium term momentum is negative as the MACD (moving average convergence divergence) histogram is printing in the red with a downward sloping trajectory which points to lower prices. Prices are also oversold in the short-term. The fast stochastic is printing a reading of 6, well below the oversold trigger level of 20 which could foreshadow a correction.

New Home Sales Climb

Contrary to Monday softer than expected construction spending figure for December, Tuesday US new home sales hit a 7-month high. According to the Commerce Department, new homes sales increased by 3.7% for December which was the highest level since May 2018. Expectations were for new home sales to decline by 8.7% to a total of 600K units for December. The November figures were revised lower to 599K units, down from the initial report which was 657K units. With no revision, the December figures would have shown a 5.4% loss which still would have been better than the 8.7% loss expected for December.

China Lower its Growth Target

In the state of the Chinese Union, the National People Conference, Chinese authorities lower growth expectations. The deficit to GDP ration was raised to 2.8% in an effort to stimulate the economy. The central bank will fund local bonds to try to stimulate infrastructure. Chinese officials reduced their annual growth target to a 6-6.5% range compared to a prior estimate of 6.5%.