Gold Price Prediction – Prices Rise as Yields Drop Following CPI

Gold prices whipsawed and moved higher but remained rangebound.  U.S. yields whipsawed, especially the 2-year yield but then moved lower, showing that the current level of yields had already priced in this scenario. The dollar moved lower, giving a bump to gold prices along with a decline in the 2-year yield and expectations of a rapid Fed hike.

Technical Analysis

Gold prices moved higher on dollar weakness. Support is seen near the 10-day moving average at 1,775. Additional support on the yellow metal is seen near the September lows at 1,721. Resistance is seen near the 50-day moving average at 1,795. The 10-day moving average has crossed below the 50-day moving average, which means a short-term downtrend is in place. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. Medium-term negative momentum has decelerated as the MACD histogram is printing in negative territory with a rising trajectory which points to consolidation.

CPI Reflects Strong Year over Year Growth

The consumer price index, rose 0.8% for November and 6.8% pace year over year, which was the fastest rate since June 1982. Excluding food and energy prices,  CPI was up 0.5% for the month and 4.9% from a year ago, which was the sharpest pickup since mid-1991. Expectations were for a headline year-over-year increase of 6.7%. The month-over-month numbers were slightly less than expected which might be the highs for this cycle ahead of a Fed tightening.