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Gold Price Prediction – Gold prices edge higher despite the rally in the dollar

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·2 min read
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Key Insights

  • Gold prices remain little changed despite concerns over slower global growth. 

  • ISM Report signaled that job conditions might be better than expected. 

  • Treasury yields climbed higher. 

Gold prices traded flat today amid rising yields and the stronger dollar. Slower growth and the Fed’s promise to fight inflation undermine gold prices and boost the dollar. The dollar strengthened ahead of expectations for aggressive Fed tightening in June and July. 

Benchmark yields rise as investors maintain their focus on Fed rate hikes and mounting price pressures. The ten-year yield moved declined by 8.2 basis points to 2.928%. 

The Job Openings and Labor Turnover Survey (JOLTS) report for April came in at 5.46 million, dropping sharply by 455,000 from the previous month. The gap between job openings and available workers was reduced.

However, the reading still indicates that there is a tight labor market where labor supply matches the demand for labor.

The ISM Manufacturing Index indicated that firms plan to ease the pace at which they hire employees. The employment reading registered 49.6, which is the first reading under 50 since November 2020.

Hiring will slow down relative to labor supply, so there will be fewer openings compared to people looking for jobs. This situation will exert upward pressure on labor costs.

These readings come in two days before May’s non-farm payroll report. Economists estimate that 328,000 more jobs will be added from the previous month and that the employment rate will fall to 3.5%.

Technical Analysis

Gold prices hover near the 10-day moving average of 1848. Gold faces a bearish bias as it loses its attractiveness to investors as looming global inflation concerns cause investors to rotate into the dollar. Aggressive Fed monetary policy boosts the dollar. 

Support is seen near the 200-day moving average of 1841. Resistance is seen near the former support level of the 10-day moving average near 1850. 

Short-term momentum turns positive as the Fast Stochastic generated a crossover buy signal. Prices are neither overbought nor oversold as the fast stochastic prints a reading of 74.65, headed for the overbought trigger level of 80. 

Medium-term momentum turns positive as the MACD generated a crossover buy signal. This occurs as the 12-day moving average minus the 26-day moving average crosses below the 9-day moving average of the MACD line. The  MACD (moving average convergence divergence) histogram has a negative trajectory that points to lower prices.

This article was originally posted on FX Empire