Gold Price Prediction – Prices Trade Sideways as the Dollar Rallies

Gold prices moved lower and continued to trade sideways in a tight range. This comes at the dollar broke out against the yen and moved higher against the euro.  The dollar gained traction despite a slightly softer than expected ISM manufacturing report.  Softer than expected EU PMI data and weak German retail sales weighed on the Euro. A weaker than expected Tankan survey was the catalyst that weighed on the yen.

Technical Analysis

Gold prices continued to consolidate and has been trading sideways for approximately 4-weeks.  Support on the yellow metal is seen near an upward sloping trend line that comes in near 1,181. Resistance is seen near the 10-day moving average at 1,196.  Momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in the red with a declining trajectory which points to consolidation.

Data was Solid

Manufacturing data was solid, as the ISM manufacturing reported for September shows a contraction that was in line with expectations. The The Institute for Supply Management (ISM) reported that its national factory activity index declined by 1.5 points to a reading of 59.8 in September 61.3 in August. The August reading was the highest in 14-years.  The index for new order fell to 61.8 from 65.1 in the prior month but still remains well above the 50, expansion contraction level.  Employment rose to 58.8 which was the highest reading since February.

Construction spending Edge Higher

The US Commerce Department reported that construction spending edged up 0.1%in August. Data for July was revised up to show construction rose 0.2% instead of the previously reported 0.1% gain. Expectations were that construction spending would increase 0.4% in August. Construction spending rose 6.5% on a year-on-year basis. Spending on public construction projects jumped 2.0% in August to the highest level since July 2009.