Gold Price Forecast: XAU/EUR holds in consolidation, but focus is on a correction higher

Update:

The price remains in consolidation into the open of Asia although from a technical point of view, the bulls have their eyes on a meaningful retracement towards EUR1,610 which is a 38.2% Fibonacci level. The downtrend has been limited by the US dollar's strength, but when looking to the EUR/USD, it could be argued as being overstretched. The US reached a fresh cycle high and the Federal Reserve is priced for a faster pace of tapering whereas the European Central Bank remains dovish. December will be a crucial month in this regard and should there be a hint of convergence between the ECB and the Fed, then gold could break higher.

End of update

Gold (XAU/EUR) vs. the euro trims some of its weekly losses, advances 0.01%, trading at €1,596 during the day at the time of writing. Thin liquidity conditions with the US on Thanksgiving holiday, and an upbeat market, put a lid on the yellow-metal free fall. European stock indices are in the green, while US equity futures point to the upside.

Meanwhile, the German 10-year bund, which significantly influences the EUR, falls almost three basis points, sitting at -0.248%. Also, German Real Yields drop seven basis points, down to -1.93%, weighing on the EUR fall against the non-yielding metal.

Choppy trading conditions in the XAU/EUR keep gold trading in a narrow range of €1,594-€1,600; amid thin liquidity conditions, US Stock and Money Markets remain closed, in the observance of Thanksgiving.

On Thursday, the Eurozone economic docket featured the German GFK Consumer Confidence Survey for December showed a further contraction than expected. The number came at –1.6, lower than the -0.5 expected. Further, the Gross Domestic Product for Germany for the Q3 came at 1.7%, a tenth lower than the 1.8% expected, which caused no meaningful impact on XAU/EUR. 

XAU/EUR Price Forecast: Technical outlook

The daily chart depicts that gold corrected beneath the top-trendline of the Pitchfork’s channel, from YTD tops around €1,650, down to around €1,580, near the middle-trendline of Pitchfork’s channel, which acted as support. Since then, gold has stabilized around the €1,575-€1,600 range, though XAU/EUR still tilted to the upside, per the daily moving averages (DMA’s) residing below the spot price with an upward slope.

On the upside, the first resistance would be €1,600. A breach of the latter would expose Pitchfork’s top-trendline to around €1,640. Otherwise, the first support would be Pitchfork’s middle-trendline around €1,575, followed by the confluence of the 50-DMA and the July 16 swing high at €1,550.