Gold Prices Attempt to Rally but Experience Dead-cat Bounce

Key Insights

• Gold prices attempted to rally but experienced a dead-cat bounce.
• The dollar broke out to new highs.
• Treasury yields were lower.

Gold prices attempted to rally but failed to gain traction. Despite a decline in Treasury yields on Tuesday, the dollar continued to break out to fresh highs. Since gold is quoted in dollars, a strong dollar generally weighs gold prices. The yield differential (the difference between U.S. Treasury yields and foreign yields) favors the greenback.

The U.S. Commerce Department reported on Monday that the U.S. The advanced, durable goods headline number rose 0.5% compared to expectations that the headline number would increase by 2.2%. Excluding transportation, durable goods rose 1.6% in March. Non-Defense ex aircraft was 0.9%, and shipments rose 1.3%.

Technical Analysis

Gold prices attempted to rally but experienced a dead-cat bounce. The lack of momentum could foreshadow another test at support. Resistance is seen near the 50-day moving average, near 1,936. Support is seen near the April lows at 1,890.

Short-term momentum has turned negative as the Fast Stochastic generated a crossover sell signal. Prices are oversold as the fast stochastic prints a reading of 9, below the oversold trigger level of 20.

Medium-term momentum has turned negative as the MACD generates a crossover sell signal. This occurs as the 12-day moving average minus the 26-day moving average crosses below the 9-day moving average of the MACD line. The  MACD (moving average convergence divergence) histogram has a negative trajectory that points to lower prices and accelerates negative momentum.