Gold Price Prediction – Prices Trade Sideways but Momentum is Negative

Gold prices moved sideways on Monday as traders continued to absorb the news Friday that US payrolls were stronger than expected. US yields remain buoyed, as traders now await Fed Chair Powell’s testimony in front of Congress this week which will likely grab the headlines. German Industrial production was stronger than expected which eliminated some of the downward pressure seen on the Euro.

Technical Analysis

Gold prices were slightly lower on Monday, after experiencing downward pressure at the end of last week. Support is seen near the July lows at 1,388. Resistance is seen near the July highs at 1,437. Medium term 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 down ward sloping trajectory which points to lower prices. Short term momentum has also turned negative as the fast stochastic generated crossover sell signal.

German Industrial Production and Exportss Come in Stronger than Expected

German Industrial increased by 0.3%.  This followed the worse than expected German manufacturing orders released on Friday. Germany also reported a stronger than expected rise in exports which rose by 1.1% following a substantial decline of -3.4% in April.  Imports unexpectedly fell -0.3% rather than increase by 0.5%.

Fed chair Powell’s testimony has become more significance following a robust US jobs report on Friday. Recall that non-farm payrolls increased by 224K jobs compared to expectations that it would rise by 165K jobs.  Some fear that if the Fed delivers a rate cut in July, it would be seen as capitulating to President Trumps demand. The market is currently pricing in one rate cut in 2019, compared to 2-rate cuts ahead of the payroll report.