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Gold Price Forecast – Consolidation Before Breaking Lower?

Gold Price Forecast – Consolidation Before Breaking Lower?

Nick Cawley, Strategist

Gold Price (XAU/USD), Chart, and Analysis

  • Gold is off over 4% so far this week as sellers hold sway.
  • A confirmed break of the September 2021 low opens the door to further losses.
  • Retail traders continue to build net-long positions, a negative contrarian indicator.

For all market-moving data releases and events, see the DailyFX Economic Calendar.

The technical outlook for gold remains negative despite having shed over $80/oz. this week already. The precious metal is close to printing a new 10-month low, and a confirmed break here opens the way to sub-$1700/oz. levels. One closely-watched technical signal, the 50-day sma below the 200-day sma crossover – ‘death cross’ – became active on June 17th when the gold closed around $1,840/oz. The sell-off since this bearish crossover appeared has been relentless with any bear market rallies sold into.

A Comprehensive Guide to Moving Averages

Looking at the daily chart, prior levels of horizontal support have now turned into resistance and will likely hold any attempt by the precious metal to move higher. In the short term, $1,753/oz. and $1,786/oz. will prove the first two levels of resistance, while a break below $1,721/oz. (late-September double low) opens the way to the $1,678/oz. zone, before the early August $1,668/oz. low comes into play. The CCI indicator shows gold in oversold territory and this may slow losses in the short term.

Gold Daily Price Chart – July 8, 2022

Gold Price Forecast – Consolidation Before Breaking Lower?

Retail trader data show 87.56% of traders are net-long with the ratio of traders long to short at 7.04 to 1. The number of traders net-long is 3.49% higher than yesterday and 7.82% higher from last week, while the number of traders net-short is 3.59% lower than yesterday and 10.04% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Gold prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger Gold-bearish contrarian trading bias.

Gold Price Forecast – Consolidation Before Breaking Lower?

What is your view on Gold – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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