Gold Price Prediction – Prices Tumble as the Dollar Rallies

Gold prices tumbled on the first trading day of 2022 as the dollar rallied and yields rose. Riskier assets such as stocks rallied as growth prospects were priced into the equity markets. This week is packed with U.S. data, including ISM manufacturing and services, ADP payrolls, and the U.S. employment report, which will anchor the week. Historically, gold has outperformed in January.

Technical Analysis

Gold prices tumbled on Monday. Prices sliced through support are now short-term resistance and are seen near the 10-day moving average at $1,805. Additional resistance is seen near a downward sloping trend line at $1,867.  The 10-day moving average has crossed above the 50-day moving average which means that a short-term up trend is now in place. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. The MACD histogram is printing in positive territory with an upward sloping trajectory which points to higher prices.

Seasonality

Gold prices seasonally rise in January. A study of the returns of gold prices in January shows that the yellow metal has increased 100% of the time for an average gain of 4.2% over the past 5-years. During the past decade, gold prices has increased 80% of the time for an average gain of 3.7%. During the past 20-years, gold prices have increased 70% of the time for an average gain of 3.2%.