Gold Prices Retreat Back to Trend Line Support

Gold prices edged lower after breakout out on Wednesday. The dollar continued to move lower, which helped buoy the yellow metal. U.S. Treasury yields declined following a softer than expected U.S. PPI figure. The wholesale price inflation numbers follow Wednesday’s stronger than an expected consumer price index.

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Technical Analysis

Gold prices eased slightly, breaking a 4-day winning streak. Prices retreated to a downward sloping trend line that comes in near $1,823. Additional support is seen near the 200-day moving average at 1,800.   Resistance is seen near the January highs at 1,831. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index has generated a crossover buy signal. This situation 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).

PPI Came in Softer than Expected

The producer price index, which measures wholesale prices, was up 0.2% for the month, half the 0.4% expected. When measuring PPI year over year it came in at 9.7%, the highest increase going back more than a decade. The monthly gain was a sharp drop-off from the two previous months, which showed gains of 1% in November and 0.6% in October. Excluding food, energy, and trade, the core PPI increased 0.4% for the month, below the 0.5% estimate. PPI for food and energy both fell during the month, declining 0.6% and 3.3%, respectively.