Gold Price Prediction – Prices Whipsaw Despite Slowing Inflation

Gold prices were nearly unchanged on Friday, ahead of the weekends G20 meeting in Osaka Japan. Prices attempted to push higher but were rejected generating a doji day where the open and closer were nearly the same level. US inflation data showed there was very little price increases in May, which weighed on yields but the dollar was nearly unchanged on the session.

Technical Analysis

Gold prices whipsawed on Friday and finished the week up 2.85%. Support on the yellow metal is seen near the 10-day moving average at 1,390. Resistance is seen near the June highs at 1,433. Medium term momentum remains positive as the MACD (moving average convergence divergence) histogram prints in the black with an upward sloping trajectory which points to higher prices. Prices are overbought. The relative strength index (RSI) surged higher reflecting accelerating positive momentum. The current reading on the RSI is 77, well above the overbought trigger level of 70 which could foreshadow a correction. Prices can remain overbought for an extended period when a breakout such as this one occurs. The fast stochastic generated a crossover sell signal in overbought territory. The currency reading on the fast stochastic is 75, below the overbought trigger level of 80.

Inflation Slips Lower in May

Consumer prices remain subdued according to a key inflation gauge watched by the Fed. Personal consumption expenditures price index rose 0.2% last month as a rebound in food prices was tempered by moderate gains in the cost of other goods. The PCE price index increased 0.3% in April. On a year over year basis May PCE price index increased 1.5%, slowing from April’s 1.6% increase. Excluding the volatile food and energy components, the PCE price index climbed 0.2% last month May after a similar gain in April. For the year ending in May, the so-called core PCE price index increased 1.6%, matching April’s rise.