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Gold Stabilizes as US Yields Fall

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Gold Stabilizes as US Yields Fall

Gold prices have been able to stabilize after losing significant ground during the past few months.  Spot gold has rallied nearly $100 dollars an ounce since hitting its June lows near $1,180, after declining more than $500 dollar and ounce since mid-April.  As yields in the US climb, the demand for the US dollar has also climbed eroding the value of gold.

Yields in the US has been on a tear, but Thursday’s increase in jobless claims followed by Monday’s softer than expected retail sales data, put a cap on the torrid increase in US yields.  Over the past 4-trading sessions, US yields have declined more than 20 basis points in the 10-year sector, allowing the dollar to give back some of its recent gains.  In fact, the dollar index has declined more than 2 big figures from 84.40 to 82.40 since hitting a high on July 8.

Inflation data has been mixed, with the UK releasing hotter than expected year over year CPI.  The 2.9% increase from 2.7% in May was the highest since April last year.  The month over month levels were slightly better than expected.  The UK reported that CPI declined 0.2% month over month in June compared to expectations of a .1% decline.

Technically, gold prices have stabilized above the 10-day moving average which is now seen as support. Resistance is seen near the recent highs near 1,300. Momentum in increasing with the MACD generating a buy signal as the spread (the 12-day moving average minus the 26-day moving average) crossed above the 9-day moving average of the spread. The trajectory of the MACD continues to point to higher prices as the MACD touched its highest levels in the past 12-months. The RSI is printing near 49 which is in the middle of the neutral range.

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