Gold edge lower on Wednesday in light volume as the US markets were closed as the country mourned former President George Herbert Walker Bush. Yields in the US continued to move lower which weighed slightly on the dollar helping to keep the yellow metal buoyed. The Euro gained traction as US yields moved lower and the Eurozone reported final services.
Gold prices moved consolidated in light volume but the trend is still upward and the yellow metal is poised to test the October highs near 1,243. Support is seen near the 20-day moving average at 1,219 and then the 50-day moving average at 1,215. Momentum has turned positive as 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 9-day moving average of the MACD line. The MACD histogram is printing in the black with an upward sloping trajectory which points to higher prices. The fast stochastic surged higher and is now printing a reading of 84, above the overbought trigger level of 80 which could foreshadow a correction.
Fear of a global economic slowdown has pushed the 10-year yield down below 3% hitting 2.91%, which is the lowest since September 7 and is on its way to test the August 22 low near 2.81%. There are rising concerns of an inverted yield curve in the US, which would point to a recession. Market expectations for the December 19 FOMC meeting have been largely unaffected, with the futures market pointing to a 75% chance of a 25-basis point rate hike. The adjustment has been seen further out as the 2-year yield now implies only 1-hike during 2019.
The Eurozone reported final services and composite PMIs for November at 53.4 and 52.7, respectively. Both of the final reading where above the flash readings, driven largely by improvements in Italy and France. Next week’s ECB meeting will be very important, as new staff forecasts will be released.