Gold Prices Hold Steady Despite a Rising Dollar

Gold prices consolidated for a third consecutive trading session after finishing last week up 5.7%. U.S. Treasury yields moved lower in the wake of the worse than expected PMI flash reports. The U.S. was not the only country that saw declines in purchasing manager index surveys. The U.K. and Europe also saw declines. The spread of the Omicron variant has taken its toll on sentiment.

Technical Analysis

Gold prices moved consolidated on Monday, forming a doji day, a sign of indecision. Support is seen near the 10-day moving average at 1,1827.   Resistance is seen near the November highs at 1,877. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. Prices have moved out of overbought territory below the overbought trigger level of 80, reflecting accelerating negative momentum. 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 is printing in positive territory with an upward sloping trajectory pointing to higher prices.

 Flash PMIs Show Deceleration

The flash PMI’s reported by IHS showed that manufacturing and services both fell in January. These were the lowest prints on sentiment by purchasing managers in the last 18-months. The Eurozone PMI softened to an 11-month low coming in at 52.4. The U.S. manufacturing PMI fell to 55 while the services PMI fell to 50.9, which is just above the expansion-contraction level of 50.