Gold prices moved higher, trading in a very tight range as the dollar move sideways generating little direction for the yellow metal. Prices continue to test support, as well as short term resistance, and while its very hard to short a quiet market, its hard to see the dollar selling off, which should keep a cap on gold prices. The more important data points will be released later in the week, with U.S. PPI and CPI the drivers for the currency markets. With the Fed signaling that September is a live meeting where rates will likely rise, the focus is on the December Fed meeting. Fed fund futures are currently pricing in a 50% chance of a 25-basis point rate hike. Stronger than expected inflation numbers will solidify this notion and likely drive gold prices toward target support. A weaker than expected number would like generate a relief rally as treasury yields decline and the dollar gives back some of its gains.
Prices are rangebound with support near the July 2017 lows at 1,204 and resistance near the 10-day moving average at 1,215. This has gold trapped in a 11 dollar range. The first lever of target resistance will be the late July highs at 1,229. Support below the 1,204 level is the 1,198 level and then the 1,120 region. Momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). Additionally, the fast stochastic, which is a momentum oscillator generated a crossover buy signal which points to accelerating positive momentum. The fast stochastic signal line is printing a reading of 16, below the oversold trigger level of 20 which could foreshadow a correction in gold prices.