Gold Price Set Up for More Losses
Gold/Silver Technical Outlook:
- XAU/USD continues to trade under significant support in the 1670s
- The sideways price action is creating a descending wedge that should lead to lower levels
Spot gold (XAU/USD) continues to trade heavy, near its cycles lows. Back in late September, early October gold was able to recover back above important support around 1677, but it only held for a few days as price quickly sunk back beneath.
Since trading back under it has been unable to regain this important area, and in the process it has been building a descending wedge. This pattern is set up to lead XAU to even lower levels in the days/weeks ahead.
A daily close below 1614 should kick off another wave of selling, with a high prior to the pandemic seen as next possible level of support, it resides around 1556. If selling gets heavy then we may ultimately see the 2020 low at 1451 hit.
It would be quite the hit so it would likely take some time, but not out of the realm of possibility in the next two to three months. The measured move of the wedge (based on height of pattern) implies a move to the lower 1500s.
What could turn things around at this immediate juncture is if we see a breakdown from the wedge that is sharply reversed and price comes back inside the pattern and then out the other side. Pattern failures can result in sharp moves in the opposite direction.
For now, playing it as it stands in front of us and that looks to be on the downside with a daily close below 1614.
Gold (XAU/USD) Price Weekly Chart
Gold (XAU/USD) Price Daily Chart
Gold Chart by TradingView
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.