Gold Price Prediction – Prices Whipsaw Following ECB Decision

Gold prices whipsawed following the ECB meeting. The central bank did not disappoint, cutting rates by 10-basis points and announcing they will start a bond purchase program on November 1.  US yields moved higher with the 10-year yield hitting a 2-week high, running into the 50-day moving average. The dollar whipsawed initially moving higher as the euro tumbled in the wake of the ECB decision but then reversing and moving lower. President Trump was on the tape again saying that the Fed needs to follow the path of the ECB and reduce rates below zero. He was particularly annoyed by the increase in the value of the dollar relative to the euro.

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Technical Analysis

Gold prices whipsawed initially moving higher running into resistance near the 10-day moving average at 1,515 and then moving lower. Short term momentum has turned positive as the fast stochastic generated a crossover buy signal in oversold territory. Currently the fast stochastic is printing a reading of 13, which is well below the oversold trigger level of 20 which could foreshadow a correction. Medium-term momentum is negative as the MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices.

The ECB Cut Interest Rates

The European central bank cut its key deposit rate and said it would begin purchasing 20 billion euros a month of asset purchases, known as quantitative easing which is scheduled to begin on November 1. The level of asset purchases was lower than some investors had hoped. Mr. Draghi said it was “high time for fiscal policy to take charge,” suggesting that monetary policy alone would not be able to stimulate economic growth and that the EU would need fiscal policy to help generate a better investment environment.