Gold Price Prediction – Prices Experience Dead-Cat Bounce

Gold prices traded sideways and continued to experience a dead-cat bounce. The upward momentum was drained by the selloff last week. The rally in the dollar on Monday generated headwinds for gold prices as risk-off speed accelerates. U.S. Yields moved lower as the safety of U.S. treasury bonds lured traders. Gold prices have failed to become the security of choice during a risk-off period. The U.S. debt ceiling is approaching, which means that Congress needs to extend spending, or the government will shut down.

Technical analysis

Gold prices consolidated and continue to form a bear flag pattern. This scenario is a continuation pattern that pauses before it refreshes lower. Generally, the recovery from a sharp selloff is muted forming a dead-cat bounce before prices start to move lower again. Prices remained below resistance seen near the 10-day moving average, at 1,782. Target support is seen near the August lows at 1,677. The 10-day moving average has crossed below the 50-day moving average, which means that a short-term downtrend is now in place. Short-term momentum has reversed and turned positive as the fast stochastic generated a crossover buy signal. Prices are oversold as the fast stochastic is printing a reading of 17, below the oversold trigger level of 20, which could foreshadow a correction.

Medium-term momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover signal. This sell signal 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). The MACD histogram is printing in negative territory with a downward sloping trajectory which points to lower prices.