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David Becker
Stacks of gold bars

Gold prices moved lower on Monday as riskier assets gained traction across the globe putting upward pressure on US yields which buoyed the dollar. The rally in the greenback paved the way for lower gold prices. The rise in the greenback comes despite slightly better than expected US Eurozone final PMI numbers for October. The strong jobs data released on Friday, continues to buoy US yields.

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Technical Analysis

Gold prices moved lower on Monday testing support near the 10-day moving average at 1,499. Additional support is seen near the 100-day moving average at 1,472. Resistance is seen near the October highs at 1,517. Prices are rangebound and volatility is declining. Short term momentum is positive as the fast stochastic generated a crossover buy signal, and is accelerating higher. The fast stochastic is printing above the overbought trigger level of 80 which could foreshadow a correction. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index recently 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 the black with an upward sloping trajectory that points to higher prices.

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EU PMI’s Rise

The eurozone final manufacturing PMI printed 45.9 for October, slightly better than the flash reading of 45.7.  Germany’s final PMI came in at 42.1, slightly higher than the 41.9 flash reading. Germany is solidly in contraction territory.  Spain’s PMI surprised on the downside at 46.8 versus the initial flash of 47.7 in September as new orders disappointed with firms highlighting political uncertainty.  Italy’s reading was right on expectations at 47.7 versus 47.8 in September, with new orders showing the 15th consecutive month of contraction.

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