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Gold Price Prediction – Energy is Building as Volatility Slumps

David Becker

Its Groundhog Day again for gold prices as they continue to consolidate in a very tight range. US yields continue to move higher as riskier assets continue to gain traction. Better than expected German IFO data failed to lift the Euro which appears to have capped gold prices. S&P changed its credit rating for the UK to stable from negative which should eventually help the pound and take some of the risk premia out of gold prices.


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Technical Analysis

Gold prices are storing volatility which is getting pent up as prices trade sideways.  resistance near the 50-day moving average near 1,477. Short term support is seen near the 10-day moving average at 1,470. Additional support on the yellow metal is seen near an upward sloping trend line that comes in near 1,462. Momentum is decelerating. Short term momentum recently turned positive as the fast stochastic generated a crossover buy signal. The trajectory of the fast stochastic is turning, and should not be considered neutral. Medium-term momentum is positive to neutral as the MACD histogram prints in the black with a declining trajectory which points to consolidation. Gold prices are poised to break one way or another, as volatility has hit the lowest levels of the year.

European Data Surprises

The German IFO surprised the markets with the December business climate survey came in at 96.3, with the expectations at 93.8 and the current assessment at 98.8.  Additionally, S&P changed the outlook for the UK credit to stable from negative. Separately, Fitch took the UK off its negative credit watch but maintained a negative outlook. Both rating agencies rate the UK AA.

This article was originally posted on FX Empire