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Gold Price Prediction – Prices Surge and Break Out; Gold Poised to Test $1,790
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Gold prices broke out and surged higher as the dollar eased slightly following last week's announcement by the Fed that it was increasing its lending facility.
Yields edged higher but were nearly unchanged. Gold volatility, reflected by the VIX of gold, rebounded to 30% after sliding for three consecutive trading sessions. Hedge funds added to their long position in futures and options according to the latest commitment of traders report.
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Technical Analysis
Gold prices surged higher breaking out to fresh 7-year highs and poised to test target resistance near the August 2012 highs near 1,791. Support on the yellow metal is seen near the March highs at 1,703. Additional support is seen near the 10-day moving average at 1,638.
A short-term trend is upward sloping as the 10-day moving average has crossed above the 50-day moving average. Short term momentum is positive as the fast stochastic generated a crossover buy signal. The trajectory of the fast stochastic is upward sloping which points to higher prices. The current reading of the fast stochastic is 94, above the overbought trigger level of 80 which could foreshadow a correction. Medium-term momentum has also turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. The MACD histogram also generated a crossover buy signal, and now the trajectory is moving higher which reflects accelerating positive momentum.
According to the CFTC, hedge funds added to their long position in futures and options. Managed money added 10K contracts to long position in futures and options while reducing short position by 109 contracts. Open interest that is long outnumbers open interest that is short by 188K contracts.
About the Author
David Beckerauthor
David Becker focuses his attention on various consulting and portfolio management activities at Fortuity LLC, where he currently provides oversight for a multimillion-dollar portfolio consisting of commodities, debt, equities, real estate, and more.
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