Gold Price Prediction – Rising US Yields Fail to Generate Headwinds

Gold prices moved higher on Wednesday but continued to trade sideways as historical volatility tumbles to the lowest point since June.  The dollar is also nearly unchanged despite a breakout in yields which has lifted the 10-year to the highest levels since mid-May.  The higher yield have increased the yield differential between the US and its major counterparts, but has failed to buoy the greenback. The recent trade dispute between the US and China has capped the upside in the greenback, which has allowed gold prices to consolidate.

Technical Analysis

Gold prices moved higher rising to resistance near the 50-day moving average at 1,207. Support on the yellow metal is seen near the 20-day moving average at 1,199. Historical volatility has tumbled to the lowest levels since June. Prices moved sideways in June and eventually broke down to lower levels. The sideways prices action has narrowed the Bollinger bands, which has pushed the standard deviations of the returns to historically low levels. This is measured by the Bollinger band width, which has dropped to 0.02, which is extremely narrow.  Short-term momentum has turned positive  as the fast-stochastic generated a crossover buy signal. The MACD (moving average convergence divergence) histogram is printing in the black with a flattening trajectory which points to consolidation.

The trade dispute between the US and China continues to drive the capital markets.  What is clear is that this spat is going to be protracted, and will unlikely end in the near future. The Chinese want to negotiate, but also need to save face. There is no way they will just bend to Trumps demands. Xi is President for life and needs to think beyond 2 or even 6-years.  The trade dispute has capped the dollar which might be helping gold prices remain buoyed. In the wake of the response from China to the US trade tariffs, Trump could come back with additional import tariffs.