Gold prices continue to move sideways as recent economic data has kept U.S. Treasury yields rangebound, holding the dollar in check. The dollar index consolidated its recent gains, which removed some of the resistance gold prices have been seeing. Weaker than a decline in jobless claims offset expected U.S. Durable goods orders. The jobs data will be a key factor for the Fed. Chair Powell will begin to feel more comfortable tapering when jobless claims decline to levels that were seen before the pandemic.
Technical analysis
Gold prices moved higher on Thursday, and continue to form a bear flag continuation pattern. This is a pause that refreshes lower. Prices remain above support near the and upward sloping trend line that comes in near $1,760.
A break of this level would lead to a test of target support near an upward sloping trend line that comes in near $1,731. Resistance is seen near the 100-day moving average at 1,794. The 10-day moving average has crossed below the 50-day moving average, meaning that a short-term downtrend is now in place. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. Prices are oversold. The current reading on the fast stochastic is 16, below the oversold trigger level of 20 which could foreshadow a correction. Medium-term momentum has turned negative as the MACD (moving average convergence divergence) as the MACD (moving average convergence divergence) index generated a crossover sell signal. The MACD histogram is printing in negative territory with a rising trajectory which points to consolidation.
The Dollar is the Key
The movement in gold prices will follow dollar movements. The greenback will key in on U.S. yields which have stabilized after the last Fed meeting. Fed Chair Powell made a reasonable argument that inflation needs to be compared to the period before the pandemic and not only on items that the pandemic has impacted. For example, gasoline prices are much higher than last June but not much higher than they were in January of 2020 before coronavirus spread throughout the U.S.