Gold Price Prediction – Prices Surge on Dollar Pullback

Gold prices surged higher on Wednesday as the dollar retraced some of its gains. U.S. yields were mixed as the 2-year yields continued to gain ground, but the curve’s long-end eased. Since gold is priced in dollars, a weaker dollar generally leads to a stronger quote for the yellow metal. The U.S. Labor Department released a stronger than expected CPI report, but most of the gains were due to the volatile food and energy sector.

Technical analysis

Gold prices surged higher on Wednesday, breaking through resistance which is now support near the 50-day moving average at 1,776. Target resistance is a downward sloping trend line that comes in near 1,800. Short-term momentum is positive as the fast stochastic recently generated a crossover buy signal. Prices are overbought as the fast stochastic is printing a reading of 95, above the overbought trigger level of 80. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in positive territory with an upward sloping trajectory which points to higher prices.

CPI Rises More than Expected

As food and energy price rises drove the headline figure, consumer prices increased slightly more than expected in September. The CPI rose 0.4% for the month, compared with the 0.3% expected. On a year-over-year basis, consumer prices increased 5.4% versus the estimate for 5.3% and the highest since January 1991. Excluding food and energy which are the more volatile components of the price index, CPI increased 0.2% on the month and 4% year over year, against respective estimates for 0.3% and 4%