Gold prices broke out as the 10-year yield tumbled to make new all-time lows. The 10-year yield hit a yield of .65 basis points down another 25-basis points on Friday despite a stronger than expected US non-farm payroll report. The 10-year yield closed the session at new closing lows at 75-basis points. Investors have now baked in a 50-basis point interest rate cut when the Fed meets again in 2-weeks. This follows the emergency interest rate cut the Fed announced on Tuesday, which cut 50-basis points from the Fed Fund rate. The dollar continued to trend lower, breaking down pushing through the 2020 lows, and testing the January 2019 lows. With the dollar continuing to move down, gold prices still likely have room to run.
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Gold prices broke out on a weekly basis and despite forming a doji day where the open and the close were at the same level, prices were up more than 5% for the week. The yellow metal settled at a 7-year high. Prices are poised to test the February intraday highs at 1,690. Short term support is seen near the 10-week moving average at 1,590. Additional support is seen near the 50-day moving average at 1,579. Medium-term momentum has turned positive. The MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram also generated a crossover buy signal, crossing through the zero-index level. The index has an upward sloping trajectory which points to accelerating positive momentum. The weekly MACD is printing in the black with an upward sloping trajectory which points to higher prices.
The weekly fast stochastic also generated a crossover buy signal which reflects accelerating positive momentum. The weekly fast stochastic is now printing a reading of 83, above the overbought trigger level of 80, which could foreshadow a correction. Prices can continue to rally as the fast stochastic is printing a reading of 78 short of the overbought trigger level of 80.
This article was originally posted on FX Empire
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