Gold Prices Ease Higher Despite Headwinds from a Stronger Dollar

Key Insights

• Gold prices rebounded from session lows to close slightly higher.
• The dollar broke out to new highs.
• Treasury yields rebounded despite soft headline GDP data.

Gold prices rose on Thursday after testing lower levels. 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, despite a softer than expected headline GDP print.

According to the U.S. Commerce Department, Gross domestic product unexpectedly fell by 1.4% in Q1. Expectations were for a 1% increase. The price deflator, used to gauge inflation, rose 8% yearly. Most of the losses came in the trade balance as imports surged relative to exports. Government spending also dropped. Consumer spending held up well for the quarter, rising 2.7%.

Technical Analysis

Gold prices rebounded after testing lower levels. Prices closed at resistance which is former support near the April lows at 1,890. Support is seen near the 200-day moving average at 1,832. The soft bounce is likely a pause that refreshes lower.

Short-term momentum has turned positive as the Fast Stochastic generated a crossover buy signal. Prices are oversold as the fast stochastic prints a reading of 15, 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.