Gold Prices Rise Ahead of Thursday’s CPI Report

Gold prices continued to move higher despite a small rebound in the dollar. U.S. yields moved lower across the curve but still remain buoyed. The interest rate swaps curve is currently pricing in 145-basis points of tightening over the next 12-months. This level is the highest increase in rates of the OECD countries. Mortgage rates surged higher in the wake of the backup in 10-year yields. Corresponding mortgage applications dropped 10%, reflecting the lack of demand with higher rates.

Technical Analysis

Gold prices rallied slightly and remained rangebound. Prices remain above support near the 50-day moving average at 1,804. Resistance is seen near a downward sloping trend line that comes in near $1,856. Short-term momentum has reversed and turned positive as the fast stochastic generated a crossover buy signal. 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.

Mortgage Applications Fall

According to the Mortgage Bankers Association, United States mortgage applications dropped 10% last week compared with the previous week and were 12% lower year over year. The average loan size hit another record high at $446,000, indicating that most of the buying activity is on the higher end of the market, where there is comparatively more supply.