Gold Prices Breaks Down as Dollar Soars

Key Insights

• Gold prices broke down through support.
• The dollar broke out to new highs.
• Treasury yields moved higher.

Gold prices broke down through support. The dollar broke out to fresh highs, which weighed on the yellow metal. Since gold is quoted in dollars, a strong dollar generally weighs gold prices. Treasury yields rose.

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 broke down following a dead-cat bounce. The lack of momentum earlier in the week led to a breakdown in support. Short-term resistance is seen near the April lows at 1,890. Support is seen near the 200-day moving average at 1,832.

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 4, 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.