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Gold Price Prediction – Gold prices reverse gains as the dollar rallies

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·2 min read
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Key Insights

  • Gold prices fell despite investors’ concerns over slower global growth. 

  • Rising mortgage rates have led to higher home prices.

  • Treasury yields traded higher as the dollar rose. 

Gold prices move lower as yields and the dollar rise. Gains were capped as the precious could not capitalize on the dollar’s decline last week. The dollar strengthened ahead of Fed tightening and slower global growth concerns. 

Benchmark yields rise as investors remain concerned about rising inflation globally despite the PCE reading from Friday indicating that US inflation might be easing. The ten-year yield moved rose by 6 basis points. 

The Case-Shiller Home Price Index, which was released on Tuesday, indicated that home prices rose 20.6% in March compared to what they were in March 2921.

The Case-Shiller index is a three-month running average ending in March. The reading signals that mortgage rates continue to rise, which was passed on to rising home prices. Mortgage rates came in at 3.29% in January and climbed to 4.67% in March. 

Mortgage rates spiral ahead of sustained Fed rate hikes. Home purchases will decline if home prices keep rising. A deceleration in home prices is necessary, but it is difficult to predict when it will happen. Price growth cannot go on much longer. 

Technical Analysis

Gold prices break below the 10-day moving average of 1848 and hover near the 200-day moving average of 1841. Easing inflation pressures make gold less attractive to investors and slower global growth makes the dollar more appealing. This situation gives XAU/USD a bearish bias. 

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 1848. 

Short-term momentum turned negative as the Fast Stochastic generated a crossover sell signal. Prices are neither overbought nor oversold as the fast stochastic prints a reading of 66.20, 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

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