Gold daily chart, September 04, 2018

Gold Price Prediction – Price Drop as the Dollar Gain Ground

Gold prices moved lower as the dollar gained traction against most major currencies.  US yields ticked higher despite pressure on US stocks, allowing the greenback to gain ground. Industrial price inflation ticked up in Europe but was unable to put a floor under the Euro. With US core CPI above the Feds target 2% level, a September rate hike is baked into the cake.

Technical Analysis

Gold prices move lower slicing through the 20-day moving average and pushing through the 1,200 level. Target support on the yellow metal is seen near the August lows at 1,160. Resistance is seen near the 20-day moving average at 1,197. Additional resistance is seen near the 50-day moving average at 1,219. Positive momentum is decelerating as the MACD (moving average convergence divergence) histogram is printing in the black with a declining trajectory which points to consolidation. Short term momentum has turned negative as the fast stochastic recently generated a crossover sells signal. The fast stochastic generated a crossover sell signal which reflects accelerating negative momentum.

Industrial Price Inflation is Rising in Europe

Industrial Inflation is rising in the EU lead by a sharp increase in energy prices. The EU reported that inflation on the industrial level increased by 4% year over year in July slightly more than the 3.9% expected. This compares to a 3.6% year over year increase in June. Energy prices surged nearly 11% year over year while prices for intermediate goods increased by 3.2%. Core industrial prices which excludes energy increased by a solid 1.7%.  Month over month industrial prices increased 0.4% in July compared to expectations that they would increase 0.3%. While prices rose across Europe Denmark and Belgium sales the largest increased rising 9.5% and 9.8% respectively.  Inflation in Europe has been climbing which has led the ECB to state that it will terminate its quantitative easing program at the end of 2018, and potential increase rates by the middle of 2019.