Gold Prices Rises Despite Higher Yields

Gold prices continued to move higher despite a small rebound in the dollar. U.S. yields were higher, with the 10-year yield hitting 3-year highs and the 2-year yield hitting a pre-pandemic high. The German yield 2-year yield pulled back, putting pressure on the EUR/USD, which generated some mild headwinds for the yellow metal. The U.S. reported a record trade deficit as surging imports outpaced rising exports.

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.

Trade Deficit Rises to Record

An increase in imports led to a rise in the U.S. trade deficit, which increased 27% in 2021. The deficit rose to an all-time high of $859.1 billion. The deficit was at $676.7 billion in 2020. The goods deficit shot up 18.3% to a record $1.1 trillion last year. Imports of goods hit an all-time high of $1.8 trillion. Food imports were the highest on record as were those of capital, consumer and other goods. Robust import growth overshadowed a sharp rebound in exports. Goods exports surged 23.3% to a record $1.8 trillion.