Gold Price Prediction – Gold Fails to Pierce Resistance and Could Face Headwinds

Gold prices attempted to rise during the European hours but faced resistance and ground lower during North American Trade.  Softer than expected EU money supply showed that inflation expectation in the Eurozone remain soft.  EM currencies where on the defensive, as tensions in Italy are rising.  Gold prices face strong resistance near former support levels.

Technical Analysis

Gold prices attempted to move higher but faced resistance near former support now resistance at the July 2017 lows at 1,204.  Additional resistance is seen near the 10-day moving average at 1,221. Target support is seen near the August lows at 1,160.  Short-term momentum has turned positive as the fast stochastic has generated a crossover buy signal in oversold territory.  The MACD shows that negative momentum is decelerating. The MACD histogram is printing in the red with a rising trajectory which reflects consolidation.

Italy Faces Rising Tensions

Italy’s budget deficit may exceed EU targets which will lead to Italy coming back to the market to attempt to raise capital in its new 4 billion debt offer.  This is generating some rising tensions for the EU’s third largest economy. Italian stocks and bonds underperformed as peripheral yields were on the defensive. The bank share index in Italy is also declining dropping more than 2% on Tuesday.  With EM markets still facing headwinds, rising peripheral yield could benefit the yellow metal.

Money Supply Softens

Economic data in Europe was light and limited to money supply and lending figures. Money supply growth slowed more than expected down to 4.0% from 4.5% and compared to expectations that it would come in at 4.3%.  Money supply measures the amount of capital that is turning over in the system which is a gauge of inflation expectations. Lending to non-financial businesses rose 4.1% in July, flat from June, which is the best since May 2009.  Lending to households was also steady at 3.0%.