Gold prices surged higher on Friday as the dollar eased against most major currencies. US yields continued to have difficulty breaking out despite a stronger than expected retail sales report on Thursday. Friday softer than expected industrial production, appears to be the catalyst that drove yields lower.
Gold prices surged higher on Friday rising up to resistance near the 20-day moving average at 1,222. A break through this level would lead to a test of the October highs at 1,243. Prices have been rangebound since the middle of the summer, and remain on a slight uptrend. A break of the 1,243 level would lead to a test of the May 2018 highs near 1,320. Support is seen near the 50-day moving average at 1,210, and then an upward sloping trend line that come in near 1,199. Short-term momentum is positive as the fast stochastic generated a crossover buy signal. Negative momentum as reflected by the MACD is decelerating as the histogram is printing in the red with a flattening trajectory which points to consolidation.
Industrial Production Was Softer than Expected
The Federal Reserve on Friday reported that October Industrial production rose 0.1% in month over month. Expectations were that IP would experience a 0.2% gain for October. Year over year industrial production rose 4.1% in October. The softer than expected number appears to have been the catalyst that drove yields lower and the dollar higher paving the way for stronger gold prices.
Manufacturing production, which makes up approximately 75% of IP continued to grow at a solid pace for the fifth straight month, advancing 0.3% in October from the prior month. Meanwhile, output in the utilities and mining industries fell for the second month in a row in October, declining 0.5% and 0.3%, respectively. Capacity utilization, which reflects how much industries are producing compared with what they could potentially produce, fell by 0.1% to 78.4% in October. Economists had expected 78.2%.
This article was originally posted on FX Empire
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