Gold Price Prediction – Prices Consolidate as The Dollar Rises

Gold prices traded sideways, holding support but gaining little traction. Prices have had a hard time making headway as the dollar rallied and Treasury yield rose. During the week, US 10-year treasury yields increased nearly 9-basis points while the dollar rose 0.3%. Since gold is quoted in US dollars is generally has a difficult time climbing when the dollar is rising in value or treasury yields are increasing.

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Technical analysis

Gold prices moved higher but traded in a tight range climbing 0.7% for the week. Prices tested support near the 10-day moving average at 1,725. Target resistance is now seen near the 50-day moving average at 1,794. Additional support is seen near the June lows at 1,670.   Short-term momentum is positive as the fast stochastic continues to accelerate higher.  Medium-term 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 positive territory with an upward sloping trajectory which points to higher prices.

The Fed Did Not Extend Relax Capital Requirements

The Federal Reserve declined to extend a pandemic-era rule that relaxed the amount of capital banks had to maintain against Treasurys and other holdings. The Fed said it would allow a change to the supplementary leverage ratio to expire on March 31. The initial move, announced April 1, 2020, authorized banks to exclude Treasurys and deposits with Fed banks from the calculation of the leverage ratio. The decision to relax the capital requirements was key to calming the turbulent Treasury markets in the early days of the Covid-19 pandemic.