Gold Price Prediction – Gold Trades Sideways as Germany Begins to Slow

Gold prices traded sideways edging slightly lower following the long Holiday weekend in the US.  The dollar gain traction against the Euro following a softer than expected German IFO report that weighed on the EUR/USD.  Yields in the US have been under pressure allowing the dollar to ease last week, but yields in Europe are now falling faster, which is generating headwinds for the yellow metal.

Technical Analysis

Gold prices edged higher on Monday, touching resistance near a downward sloping trend line that comes in near 1,227. Short term support on gold is seen near the 20-day moving average at 1,220. Additional support is first seen near the 50-day moving average at 1,213 and then an upward sloping trend line that connects the lows in August to the lows in October and comes in near 1,208. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. This forecast accelerating negative momentum. Momentum as reflected by the MACD (moving average convergence divergence) index is neutral. The MACD histogram is printing in the black with a flat trajectory which reflects consolidation.  The relative strength index (RSI) which is a momentum oscillator that measures accelerating and decelerating momentum, is printing a reading of 52, which is in the middle of the neutral range and reflects consolidation.

Business in Germany is Decelerating

German business appears to be decelerating and the declines seen in the purchasing manager’s indices, released last week were confirmed by the IFO. The IFO Business Climate Index fell to 102.0 points in November from 102.9 points in October, marking its third consecutive decrease. The IFO’s sub-measurement of uncertainty among business had risen at its fastest level in 10 years, reflecting current concerns over geopolitics. With Germany feeling the slowdown it only a matter of time before the entire continent experiences a decline in economic growth which will weigh on the Euro and generated headwinds for gold.