Gold Price Prediction – Gold Slips Following ECB Decision
Gold prices edged lower after running into resistance near the 10-day moving average at 1,230, following the ECB meeting where the central bank left rates unchanged and said stimulus is still needed. The ECB was slightly more confident on growth and inflation and is poised to end its quantitative easing program in December and hold rates steady until the summer of 2019. Support on the yellow metal is seen near the July lows at 1,211 and then the July 2017 lows at 1,204. Momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. Softer than expected U.S.
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Durable goods data helped capped the greenback, which has placed a floor under gold prices. Gold prices are either forming a bottoming pattern and a key saying in the market is that you never short a dull market. With yields in the U.S. having a difficult time breaking through the 3% market for the 10-year treasury, gold prices have remained buoyed. The 10-year yield should be the tell for traders. A break through the 3% mark, should increase the yield differential over German yields providing an impetus for a rally in the U.S. dollar, paving the way for lower gold prices.
ECB left policy rates on hold and confirmed the guidance on QE
The European central bank left interest rates unchanged as expected and reiterated its intentions to keep their quantitative easing program steady for the balance of 2018. The ECB also said that it will keep rates unchanged until mid-2019 which will be data dependent. There is little clarification on the timeline of rates but what is clear is that the ECB will likely follow a normalization path that is similar to the Federal Reserves.
The Central bank appears to have upgraded its view on future growth and inflation. The ECB has a mandate that is inflation-focused and while growth does play a role, inflation expectations while deciding future changes in monetary policy. The ECB also believe that robust accommodative policy is still needed in many parts of the Euro-zone. With strikes beginning in Spain, the summer season could provide the backdrop for weakness across Europe.