Gold Price Prediction – Prices Trade Sideways and Form Bull Flag Pattern

Gold prices moved sideways edging lower forming a bull flag continuation pattern which is a pause that refreshes higher. The dollar moved slightly higher on Monday after rallying most of last week. There were a combination of mixed issues creating both headwinds and tailwinds for market participants. US yields moved lower on Monday but yields in Europe fell faster allow the yield differential to favor the greenback which generally boosts the dollar.

Technical Analysis

Gold prices moved slightly lower and generated a tighter range as prices formed a bull flag pattern which is a pause that eventually refreshes higher. Support is seen near the 10-day moving average at 1,409. A break of this level would generate a test of the July lows at 1,385. Resistance on the yellow metal is seen near the July highs at 1,438. Short term momentum is neutral to negative as the fast stochastic is sliding lower, and has drifted to the middle of the neutral range which reflects consolidation. Medium term momentum is negative as the MACD (moving average convergence divergence) histogram has a declining trajectory which points to consolidation.

Headwinds and Tailwinds Hit Gold Prices

The dovish commentary from Fed Chair J Powell on Wednesday and Thursday last week, weighed on US yields and allowed the dollar to ease. This paved the way for higher gold prices. This was somewhat offset by stronger than expected consumer prices released by the labor department on Thursday. Core CPI rose to the highest levels in 18-months which helped buoy US yields. US yields have increased approximately 15-basis points since the beginning of July, and could move higher as speculation of future interest rate cuts increase.