Gold Price Prediction – Prices Trade Sideways as Dovish ECB Offset Strong Jobless Claims

Gold prices consolidated and continue to move sideways following the ECB meeting where the committee left interest rates unchanged. The dovish was decisively dovish, following softer than expected PMI data which was released ahead of the ECB meeting.  With global growth slowing and inflation unlikely to rear its ugly head, gold prices could remain range bound.  A stronger than expected US jobless claims failed to buoy US yields but the dovish tone of the ECB hammered the Euro which could pave the way for lower gold prices.

Technical Analysis

Gold prices continue to trade sideways but was unable to get above the 20-day moving average which is seen as resistance near 1,285. The next level of target support on the yellow metal is seen near the 50-day moving average at 1,255. Medium term momentum remains negative as the MACD (moving average convergence divergence) histogram prints in the red with a downward sloping trajectory which points to lower prices. Short term momentum has reversed, as the fast stochastic generated a crossover buy signal in the middle of the neutral range. The combination of the two momentum indicators one could determine that consolidation is occurring.

The ECB kept interest rates unchanged and took on a dovish tone. PMIs where softer than expected putting downward pressure on the Euro.  The ECB is now convinced that the European economy is slowing but they have yet to change their staff projections which would allow the make to make a move on rates. This came as jobs data in the US continued to impress. Initial claims dropped 13,000 to 199,000 for the week ended January 19, the lowest level since mid-November in 1969 when 197,000 applications were recorded, according to the Labor Department. Data for the prior week was revised lower to show 1,000 fewer applications received than previously reported. Economists had forecast claims rising to 220,000 in the latest week.