Gold Price Prediction – Soft EU Data and Positive Momentum Point to Higher Gold Prices

Gold prices rose for a second consecutive trading session, following worse than expected flash Eurozone PMI data. While the data for the entire Eurozone remained in expansion territory German fare worse than the continent falling into contraction territory below the 50, boom-bust level. It appears that the ECB was too conservative and will now likely have to step up its easing and bond purchases to get the European economy rolling.

Trade gold with FXTM

Technical Analysis

Gold prices rallied on Monday for a second consecutive trading session and appear to be targeting the September highs at 1,556 which is resistance. The movement in gold is a classic cup and saucer breakout. Short term support is seen near the 10-day moving average at 1,500. Additional support is the 50-day moving average at 1,486. Short term momentum has turned positive as the fast stochastic continued to rise moving out of oversold territory. The upward trajectory of the fast stochastic points to rising momentum. Medium-term momentum is turning, as it appears the MACD (moving average convergence divergence) is poised to generate a crossover buy signal if prices continue to trend.

Europe Reports Soft PMI Data

Europe reported soft PMI data according to Markit.  The headline PMI composite which includes both manufacturing and services fell to 50.4 versus 52.0 expected, as manufacturing fell to 45.6 and services fell to 52.0.  Germany performed even worse than the broader EU with the composite falling to 49.1 versus 51.5 expected, as manufacturing fell to 41.4 and services fell to 52.5.  The readings suggest the manufacturing slump has dragged the entire German economy into recession.  France was also subdued as its composite fell to 51.3 versus 52.6 expected, as manufacturing fell to 50.3 and services fell to 51.6. It appears that the ECB was too conservative. They will likely need a stronger form of stimulus to jumpstart the EU economy.