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David Becker
Comex Gold

Gold prices tumbled breaking through support levels as the dollar gain traction and US yields moved higher. The benchmark 10-year US yield backed up 4-basis points testing resistance near the 50-day moving average. A break of this level would lead to a stronger dollar, as the yield differential moves in favor of the greenback. Dovish comments from the ECB weighed on the Euro, which paved the way for lower gold prices.

Technical Analysis

Gold prices dropped on Tuesday, breaking through support which is now resistance near an upward sloping trend line that comes in near 1,283. Target support on the yellow metal is seen near an upward sloping trend line that comes in near 1,260. Momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices and accelerating negative momentum. The fast stochastic also generated a crossover sell signal, which points to accelerating negative moemtnum. The current reading on the fast stochastic is 16, which is below the oversold trigger level of 20, and could foreshadow a correction.


The Euro Slides on Dovish ECB

The ECB comments are weighing on the Euro.  Sources suggest a minority at the ECB remain doubtful of the H2 recovery scenario that is incorporated into the staff projections. Similar to the aftermath of the March ECB meeting, there are now dovish leaks after this month’s meeting.   The recent data released in the EU suggests that a temporary blip is unlikely. The UK reported employment data on Tuesday.  The readings all came in as expected, with employment rising 179k and the unemployment rate steady a 3.9%.  Earnings remain unchanged, rising 3.5% year over year to 3.4%.

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