Gold Price Prediction – Prices Fall as Yields Rise Following Dismal Private Payroll Report

Gold prices dropped as the dollar rallied following ADP’s private payroll report. The dollar continued to rebound, and it appears that gold and the dollar exchange rate has decoupled. The US 10-year yields moved higher, while the 2-year yield was flat. The backup in the long end was likely due to an announcement by the treasury that it would be issuing 10-year yields. Gold implied volatility which is a component used to price gold options edged slightly higher and is hovering near the 24%, which is approximately 80% higher than the 2019 average. Implied volatility of 24% means that traders believe the price of gold with move on average 1.5% a day.

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Technical Analysis

Gold prices dropped but remained in a sideways trading top, which is starting to look heavy. Prices slipped through the 20-day moving average which was former support now resistance at 1,703. Support is seen near an upward sloping trend line that comes in near 1,673. The weekly chart of gold prices is forming a bull flag pattern which is a pause that refreshes higher.

Short term momentum on gold prices has negative as the fast stochastic generated a crossover sell signal in the middle of the neutral range. This follows a day where the fast stochastic generated a buy signal which is likely a signal of further consolidation. Medium-term momentum is negative as the MACD (moving average convergence divergence) histogram is printing in the red with a downward sloping trajectory which points to lower prices.

ADP Payrolls Tumble

ADP reported on Wednesday that private payrolls tumble declining by more than 20-million jobs which were better than expected. In fact, the average estimate was off by 2-million jobs which normally would be a huge number. The size of the number is so large and likely underestimates the true number. The Labor Department uses the week of April 12 to estimate the numbers and this was prior to the huge increases in jobless claims.