Gold Price Prediction – Gold Trades Sideways Forming a Bull Flag Pattern

Gold prices edged higher trading sideways in a tight range. Prices where buoyed by a decline in the dollar versus the Euro. The greenback has enjoyed an 8-day rally, and continued to remain buoyed on Tuesday versus the yen. Yields around the globe ticked higher which helped the yellow metal following news that the BOJ reduced the volume of bonds purchase to target short-term yields.

Technical Analysis

Gold prices continued to trade sideways, moving higher on Tuesday but remaining in a very tight range. Prices are forming a bull flag pattern which is a pause that refreshes higher. Short term support is seen near the 5-day moving average at 1,309, and then the 20-day moving average at 1,302. Resistance is seen near the January highs at 1,325.  The pause has been since the beginning of February after a late January rally. The stall in the dollar rally should help gold prices gain traction. Short term momentum is neutral. The fast stochastic has stopped declining and has formed a crossover buoy signal in the middle of the neutral range. Medium term momentum remains negative as the MACD (moving average convergence divergence) histogram is printing in the red with a downward sloping trajectory which points to lower prices.

The Bank of Japan Reduced its QE

The Bank of Japan reduced the volume of the fixed income assets it purchased for the first time in two months.  This is purely a function of the ability of the Bank of Japan to keep bond yields in a target range. Japanese yields have fallen in line with the rest of the world this year and so the bank does not need to buy as much to keep yields in their target range. The market was doing the job which meant that the BOJ could ease off of the pedal.  The BOJ just affirmed its policy stance at its January 23 meeting.  Next policy meeting is March 15.