Gold Prices Stabilize Following Last Weeks Drop

Gold prices consolidated and stabilized after falling 2.3% last week. The hawkish tone of the Fed last week was perpetuated over the weekend when Rafael Bostic, one of the Fed Governors’ said the Fed could increase rates by 50-basis points in March. The Fed is trying to keep all of their cards on the table. Meanwhile, the dollar dropped, paving the way for higher gold prices. Treasury yields also fell back despite a stronger than expected Chicago PMI.

Technical Analysis

Gold prices edged higher on Monday, gaining a foothold. Support is seen near an upward sloping trend line seen near 1,769.  A break of this support level would lead to a test of the December lows at 1,753. Resistance is seen near the 50-day moving average at 1,801. The 50-day moving average crossed below the 200-day moving average. This moving average crossover is known as the “Death Cross” and shows that a downtrend is in place. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. Medium-term momentum is negative as the MACD (moving average convergence divergence) index has generated a crossover sell signal. This situation 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 MACD histogram prints in negative territory with a downward sloping trajectory pointing to lower prices.

Chicago PMI Rises More than Expected

Chicago business barometer, which is used as a prelude to the national number from the ISM that will be released tomorrow, rose to 65.2 from a revised 64.3 in December, coming ahead of expectations for a reading of 61.7. The previous month’s level was revised up from 63.1. According to ISM, the order backlogs, employment, and supplier deliveries subcomponents all increased, while production and orders fell across the month.