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Gold Price Prediction – Prices Soar into Extreme Overbought Levels

David Becker

Gold prices continued to break out on Monday, as the US is poised to place new sanction on Iran, creating further tension. Geopolitical risks are on the rise, paving the way for higher gold prices. In Europe, German reported a disappointing German IFO survey, but the euro rallied as the dollar remains out of favor.

Technicals

Gold prices surged higher on Monday and tested 6-year highs near the May 2013 peak at 1,433. Support on the yellow metal is seen near the 10-day moving average at 1,359. Momentum remains positive as the MACD (moving average convergence divergence) histogram prints in the black with an upward sloping trajectory which points to higher prices. Prices are overbought. The relative strength index (RSI) surged higher reflecting accelerating positive momentum. The current reading on the RSI is 86, well above the overbought trigger level of 70 which could foreshadow a correction. This is the second higher reading on the RSI in the past 10-years, which shows how quickly the market has accelerated.

Weak German IFO Shows a Soft European Economy

The euro continued to move higher on Monday as the dollar failed to gain traction despite a weak German IFO survey. The IFO survey showed that the current assessment edged to 100.8 from 100.7 which is a 2-year low. The future expectations sub-component declined to 94.3 from 95.2 which was worse than expected. This is just above the 7-year low made in February at 94. US 10-year bonds are hovering near the 2% mark, as traders continue to price in multiple trade cuts in 2019. European yields are also moving lower but, they are already negative making it difficult for further declines. The German 10-year yield is -0.31 basis points, which means that you need to pay the German government 31-basis points to invest your money in a German 10-year bond.

This article was originally posted on FX Empire

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