Gold Prices Consolidate Near 8-Year Highs

Gold consolidated near 8-months highs finishing the week up 2%. The dollar edged higher on Friday despite yields moving lower. Inflation data throughout the week was robust. PPI hit a 40-year high in the U.S. while import prices hit an 11-year high. Retail sales, which are also driven by higher prices, hit 10-year highs. Fed officials have been jawboning but the upshot is that most are willing to start slowly with multiple 25-basis point hikes and if that does not reduce inflation move up to 50-basis points hikes.

Technical Analysis

Gold prices consolidated near the 8-year highs. Prices remain above support which was former resistance seen near a downward sloping trend line that comes in near $1,851. Resistance is seen near the June highs at 1,916. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. Prices are overbought as the fast stochastic is printing a reading of 95, above the overbought trigger level of 80. The relative strength index is nearly overbought printing a reading of 69, just below the overbought trigger level of 70.

Medium-term momentum is positive as the MACD (moving average convergence divergence) index has generated a crossover buy signal. This situation occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram prints in positive territory with an upward sloping trajectory pointing to higher prices.