Gold Prices Drop as Yields Surge Higher

Key Insights

• Gold prices reversed course on dollar strength.
• Treasury yields rose, driving the dollar higher,
• U.S. Housing Starts unexpectedly rose.

Gold prices reserved course on Tuesday as the dollar rallied, weighing on the yellow metal. The dollar rose as the yield differential continued to favor the greenback. Riskier assets rose, which took some of the safe-haven bid out of gold prices.

The Commerce Department reported on Tuesday that housing starts unexpectedly increased 0.3% to an annual rate of 1.793 million units last month. Data for February was revised higher to 1.788 million units from the previously reported 1.769 million units. Expectations had been for housing starts to slip to 1.745 million units. Permits for future home building increased 0.4% to a rate of 1.873 million units last month.

Technical Analysis

Gold prices tumbled on Tuesday. Prices seem to hold support is seen near the 10-day moving average at 1,953. Resistance is seen near the April highs at 1,999.

Short-term momentum has turned negative as the Fast Stochastic generated a crossover sell signal. Prices are overbought. The fast stochastic fell from above the overbought trigger level of 80, which reflects accelerating negative momentum.

Medium-term momentum is positive as the MACD (moving average convergence divergence) histogram recently generated a crossover buy signal. The trajectory of the MACD histogram is decelerating, which reflects consolidation.