Gold vs Euro: Decline Amid Peace Prospects

Market Overview

In early European trading on Tuesday, gold prices saw some stability, trading around €2500.41 per ounce, after experiencing a sharp decline of over 3% during the previous session. This decline was largely driven by the announcement from President-elect Donald Trump about imposing tariffs on imports from Canada, Mexico, and China, which raised fears of potential trade wars and initially increased demand for safe-haven assets like gold.

In addition, geopolitical developments are weighing on gold demand. Talks of a potential ceasefire in Lebanon between Hezbollah and Israel, spearheaded by US President Joe Biden and French President Emmanuel Macron, have reduced geopolitical tension in the Middle East. This prospect has diminished the immediate need for safe-haven assets, thereby reducing gold’s allure. In the United States, Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, signaled openness to a potential rate cut in December. Markets are currently pricing in a 55.9% chance of a 25-basis-point cut. The Fed’s cautious approach has contributed to maintaining gold prices at current levels.

Technical Analysis

In the hourly timeframe, gold’s decline from the higher €2600 range to current levels around €2499.52 has been pronounced. The downtrend is confirmed by strong selling pressure, with the price breaking below the 100-period weighted moving average (WMA). Gold remains firmly within the lower half of the Bollinger Bands, suggesting persistent bearish momentum with no solid signs of support emerging yet.

The immediate key support level is positioned at €2491.68, corresponding to the 61.8% Fibonacci retracement. Should this support break, the next downside targets include the 127.2% Fibonacci extension at €2484.61, followed by €2480.92 at the 141.4% extension, and €2475.61 at the 161.8% extension. A continued downward move may drive the price towards the 200% Fibonacci extension at €2465.68 if the bearish momentum persists.

Bollinger Bands continue sloping downward, with the price hovering near the lower band, indicating elevated volatility and sustained selling pressure. The inability of the price to rebound towards the middle band underscores the weak buying interest currently prevailing in the market.

Momentum Oscillators Analysis

The Relative Strength Index (RSI) stands at 33.86, nearing the oversold zone, highlighting the strength of the sellers. Despite this, the proximity to the oversold level suggests potential divergence and a possible corrective bounce if conditions persist. The Moving Average Convergence Divergence (MACD) indicator remains in negative territory, with an expanding negative histogram, emphasizing the continuation of selling pressure. Additionally, the MACD lines are below the signal line, reinforcing the bearish outlook.

Alternative Scenario

A potential bullish scenario emerges if gold prices reclaim the 61.8% Fibonacci level at €2501.61 and sustain above it. Such a move would open the door for a potential retest of the next key resistance at €2517.68, which represents the 0% Fibonacci level and a significant resistance zone. A break above this level could signal a reversal of the downtrend and pave the way for further upside potential.

Key Support and Resistance Levels

Resistance Levels:

• €2517.68: Key resistance representing the 0% Fibonacci level; a break above this could signal a trend reversal.
• €2501.61: Immediate resistance aligned with the 61.8% Fibonacci level; reclaiming this level is crucial for a potential bounce.

Support Levels:

• €2491.68: Immediate support at the 61.8% Fibonacci retracement; a break could lead to further downside.
• €2484.61: Next support level at the 127.2% Fibonacci extension.
• €2480.92: Support at the 141.4% Fibonacci extension, indicating further bearish targets.
• €2475.61: Support at the 161.8% Fibonacci extension, highlighting sustained selling pressure.
• €2465.68: The 200% Fibonacci extension, a deeper target if bearish momentum continues.

Key Events to Watch

Investors are closely watching the release of the minutes from the Federal Reserve’s November meeting, set to be published later today. These minutes are expected to provide valuable insights into the central bank’s monetary policy direction and could impact market sentiment regarding gold.

Conclusion

Gold prices against the Euro remain under pressure due to easing geopolitical tensions and a cautious stance by the Federal Reserve. Key support levels at €2491.68 and below are critical in determining whether the downward trajectory continues or if a rebound is on the horizon.