Gold Rally’s and Momentum Remain Positive

Key Insights

• Gold prices rally as yields slide.
• The dollar whipsawed.
• PPI surged more than expected.

Gold prices continued to rally, pushing through resistance as yields eased despite robust inflation. The dollar rose, but yields eased as core inflation fell less than expected. The 10-year Treasury yield hit highs not seen since 2018 but reversed and declined along with the 2-year yield.

Wholesale prices rose 11.2% year over year in March and 1.2% month over month, more than expected. Core PPI, which excludes food and energy, rose 0.9% month-over-month. Expectations were for a 0.5% increase. Services were up 0.9% compared to 0.3% in February. Despite these robust numbers, yields slid as market participants started incorporating a recession into Treasury yields.

Technical Analysis

Gold prices rallied and are poised to test higher levels. Support is seen near the 10-day moving average at 1,942. 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 is accelerating as the fast stochastic continues to rise higher. Prices are overbought. The fast stochastic is printing a reading of 97, 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.