Gold Price Prediction – Prices Surge and Continue to Break Out Reaching 5-year Highs

Gold prices shot higher surge on Thursday as Iran shot down a US military drone which is an act of aggression. This comes on a dovish fed meeting that revealed on Wednesday that rates were likely to be lower in July. The Fed also reduced its growth forecast slightly but believe the Fed fund rate will be lower by 50-basis points by the end of 2019. Safe haven activity also helped gold prices surge as the 10-year yield dipped below the 2% handle.

Technical

Gold prices surged on Thursday, testing the March of 2014 highs at 1,393. The next test of target resistance is seen near the August 2013 highs at 1,433. Gold prices are likely to continue to climb now that they have broken out of a 5-year trading range. Momentum is positive as the RSI (relative strength index) has also broken out reflecting accelerating positive momentum. The current reading on the RSI which is a momentum oscillator is 82, well above the overbought trigger level of 70 which could foreshadow a correction. Short term momentum has turned positive as the fast stochastic generated a crossover buy signal. The fast stochastic is printing a reading of 93, above the overbought trigger level of 80 which also could foreshadow a correction.

Iran reported on Thursday that it shot down a US military drone, which stoked fears. President Trump initially said Iran had made a huge mistake, but it could be somewhat who was just trigger happy. Oil prices jumped following the action. The Islamic Revolutionary Guard Corps said its air force brought down the American surveillance drone in a southern coastal region along the Strait of Hormuz. Separately, after the FOMC decision, implied yields across the Fed Funds futures strip have fallen.  The January 2020 contract is now at 1.60%, which is fully pricing in three cuts this year.  This weighed on the dollar paving the way for higher gold prices.