Gold Price Prediction – Prices Surge Along with Gold Volatility to Fresh 7-year Highs

Gold prices surge hitting fresh 7-year highs, climbing close to the $1,700 level as the spread of the coronavirus continued to buoy the yellow metal. Prices stormed higher rising by nearly 2% but closed off the higher of the day. Gold implied volatility, represented by the GVZ index calculated by the Chicago Board of Options Exchange, surged more than 9% on Monday after climbing 33% last week. This is the highest close on the gold implied volatility index is more than 6-months. The highest weekly close for the GVZ over the past 12-months is 18.5%, and the highest close of the GVZ implied volatility index over the past 10-years is 37%. This tells market participants that fear is increasing and the demand for gold options continues to rise.

 

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Technical Analysis

 

Gold prices surged but settled well of the highs of the session as profit-taking took hold. Target resistance on gold prices is seen near the 2012 highs at 1,792. Support is seen near the 10-day moving average at 1,601.

Short term momentum has turned negative despite the acceleration in the price action as the fast stochastic generated a crossover sell signal. This occurred in overbought territory which reflects accelerating negative momentum. The current reading on the fast stochastic is 89, well above the overbought trigger level of 80 which could foreshadow a correction.

The RSI continued to move higher which is a positive sign for gold prices, as momentum is moving higher in tandem with price action which reflects accelerating positive momentum. The current reading on the fast stochastic is 79, well above the overbought trigger level of 70 which also could foreshadow a correction. Medium-term momentum is also positive as the MACD histogram is printing in the black with an upward sloping trajectory which points to higher prices. The MACD recently generated a crossover buy signal.