Gold 1 OZ (XAU=X) higher as Consumer Spending Rises Slightly, Inflation Remains Under Target

Gold 1 OZ (XAU=X) higher as Consumer Spending Rises Slightly, Inflation Remains Under Target

Gold 1 OZ (XAU=X) higher as Consumer Spending Rises Slightly, Inflation Remains Under Target

Consumer spending, which accounts for two-thirds of the US economy, remains healthy at 0.2% growth in September. The strong labor market has allowed for robust spending despite worsening economic conditions worldwide and recessionary pressure building in the US. Business investment, which has now contracted for two quarters in a row, may spill over into labor and consumer spending and have a negative impact in the coming months.

While spending rose, wages remained flat, which could indicate an impending loss of momentum in consumer spending. August spending was revised upward from 0.1% to 0.2%.

Annually, Q3 consumer spending came in at 2.9%, a step down from the rapid pace of growth seen in Q2 at 4.6%. The economy grew at a pace of 1.9% in Q3, above expectations of 1.6% but below Q1 and Q2 growth figures. The ongoing trade war and worsening slowdown seen worldwide continue to impact US economic growth, although the economy continues its record-breaking period of expansion which now stands at over a decade.

Inflation

The Federal Reserve implemented a third rate cut for this year yesterday, as expected, but indicated that the monetary easing policy will now be put on pause. The Fed cut interest rates for the first time in a decade in June. Fed Chair Jerome Powell now anticipates moderate economic growth, helped along by “solid household spending and supportive financial conditions.”

Rates have been cut to hedge against recessionary pressures such as low inflation, which remains tame. Consumer prices in the personal consumption expenditures (PCE) price index saw no change again last month with a -1.3% drop in the cost of energy goods and services.

Inflation was tame in September. Consumer prices as measured by the personal consumption expenditures (PCE) price index were unchanged for a second straight month in September as the cost of energy goods and services dropped 1.3%. The PCE price index rose 1.3% annually in September and 1.4% annually in August. Excluding the volatile components of food and energy, the core-PCE price index was also unchanged last month after a 0.1% rise in August. Core-PCE is the Feds preferred measure of inflation which now stands at 1.7%, below the central bank’s target range of 2%.

Market Reaction

Gold prices are trading significantly higher today with 1.63% gain. Spot gold last traded near the top of today’s range at $1,511.20/oz with a high of $1,513.66/oz and a low of $1,482.20/oz. The upward momentum is likely a result of the off-target PCE report and the results of yesterday’s Fed meeting which saw the benchmark rate of interest drop for the third time this year.

Technical Indicators

Overall, the bias in prices is: Upwards.

The projected upper bound is: 1,548.84.

The projected lower bound is: 1,476.09.

The projected closing price is: 1,512.46.

Candlesticks

A big white candle occurred. This is generally considered bullish, as prices closed significantly higher than they opened. If the candle appears when prices are “low,” it may be the first sign of a bottom. If it occurs when prices are rebounding off of a support area (e.g., a moving average, trendline, or retracement level), the long white candle adds credibility to the support. Similarly, if the candle appears during a breakout above a resistance area, the long white candle adds credibility to the breakout.
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 25 white candles and 25 black candles.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 45.9864. This is not an overbought or oversold reading. The last signal was a buy 21 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 57.45. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 46 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 169.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 3 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 5 period(s) ago.

Rex Takasugi – TD Profile

PREC.M.XAU= closed up 16.992 at 1,512.192. Volume was 8,900% above average (trending) and Bollinger Bands were 60% narrower than normal.

Open     High      Low     Close     Volume___
1,496.2001,514.2001,493.4501,512.192 92,572
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period     50-period     200-period
Close: 1,494.83 1,504.45 1,384.75
Volatility: 10 15 14
Volume: 9,257 1,851 463

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

PREC.M.XAU= is currently 9.2% above its 200-period moving average and is in an upward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future. Our volume indicators reflect very strong flows of volume into XAU= (bullish). Our trend forecasting oscillators are currently bullish on XAU= and have had this outlook for the last 4 periods.

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