Gold Prices Rise Despite a Stronger Greenback

Key Insights

• Gold prices rallied on safe-haven flows.
• The dollar rallied.
• Chinese GDP was stronger than expected.

Gold prices rallied on Monday while most of Europe was still out on Holiday. Momentum remains strong. The dollar rose, but yields were lower. Lower mining of gold from Russia could put upward pressure on prices.

Russia produces about 10-15% of total gold volumes produced per year, worth 21 billion dollars. The sanctions are hitting the gold producers, putting upward pressure on prices. Recently the Russian central bank offered to resume its gold purchases suspended in 2020.

China reported first-quarter GDP, which increased more than anticipated. GDP rose 1.3% quarter-over-quarter.  The year-over-year rate increased to 4.8% from 4.0%.

Technical Analysis

Gold prices rebounded on Monday after a long holiday weekend. Support is seen near the 10-day moving average at 1,952. Resistance is seen near the March highs at 2070. Gold prices will need to clear the March highs for the uptrend to proceed.

Short-term momentum has turned negative as the Fast Stochastic generated a crossover sell signal. Prices are overbought. The fast stochastic is printing a reading of 91, above the overbought trigger level of 80. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) generated a crossover buy signal.

This scenario 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 which points to higher gold prices.