Gold Price Prediction – Prices Drop in Sympathy with Silver as the Dollar Surges

Gold prices dropped as the dollar moved higher and US yields rose. The yellow metal generally underperforms when the dollar is rallying. The reason steps from how gold is quoted. Since most of the gold is quoted in dollars, a strong dollar means gold has to decline to adjust for the higher overall value. Silver prices, which surged 10% on Monday, reversed course and weighed on gold prices.

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Technical analysis

Gold prices broke down, declining 1.4%, and are poised to test support near an upward sloping trend line that comes in near $1,819. A close below this level would lead to a test of the January lows at 1,802. This trend line has been strong support and prices are likely to bounce at this level. Resistance on the yellow metal is seen near the 10-day moving average at 1,853. Short-term momentum is poised to turn negative as the fast stochastic is about to generate a crossover sell signal. Medium-term momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line).

The Dollar Gains Despite Strong European GDP

Germany, France, and Spain reported better than anticipated GDP figures. Despite the solid models, the Euro broke down to the 1.20 level the lowest since November. A continued breakdown in the EUR/USD will put downward pressure on gold prices. The strength in US yields is also a negative for gold prices. The US 10-year treasury yield has increased for 4-consecutive days, which his also putting downward pressure on gold prices.