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Gold Price Weekly Outlook: XAU/USD Rally Losing Steam into July Trade

Gold Price Weekly Outlook: XAU/USD Rally Losing Steam into July Trade

Michael Boutros, Strategist

Gold prices are up more nearly 1% this week with the XAU/USD trading at 1412 heading into the close of the week / month / quarter. While the breakout of the yearly opening-range in spot gold does keep the broader focus higher, price is now trading just below lateral resistance at multi-year highs and could cap the advance near-term. These are the updated targets and invalidation levels that matter on the gold (XAU/USD) weekly price chart. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this gold price setup and more.

New to Gold Trading? Get started with this Free How to Trade Gold -Beginners Guide

Gold Price Chart - XAU/USD Weekly

Gold Price Chart - XAU/USD Weekly - GLD Tehcnical Outlook

Notes: In my last Gold Price Weekly Outlook we noted that the immediate focus is on a weekly close above critical resistance at 1392 targeting, “subsequent topside objectives at 1433 and the 100% extension of the late-2015 advance at 1451- look for a bigger reaction there IF reached.” XAU/USD took out the 1433 target early in the week to briefly register a high at 1439 before turning over.

Note that a Gold prices are on pace to mark the sixth consecutive weekly advance – the last three instances were July 2016, July 2014 and March 2014 – all major reversals / highs in price. Not a reason to get short, but certainly highlights the threat to the advance heading into the close of the month. That said, weekly RSI is now deep into overbought territory and while the border focus remains higher, the immediate advance may be vulnerable heading into the start of July (Q3) trade. Initial support now back at 1380 backed by the 2016 high-day close at 1366 – Broader bullish invalidation now raised to 1350. Topside objectives are unchanged at 1433 & 1451in event of a breach.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

Bottom line: While the broader gold price outlook remains constructive on the back of this recent breakout, the immediate advance is at risk heading into the July open- be on the lookout for topside exhaustion. From a trading standpoint, a good spot / time to reduce long-exposure / raise protective stops. Ultimately, we’ll favor fading weakness while above 1350 into the start of the quarter.Review my latest Gold Price Outlook for a closer look at the near-term XAU/USD technical trading levels.

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Gold Trader Sentiment - XAU/USD Price Chart

Gold Trader Sentiment - XAU/USD Price Chart - GLD Positioning
  • A summary of IG Client Sentiment shows traders are net-long Gold - the ratio stands at +1.73 (63.3% of traders are long) – bearish reading
  • Long positions are 3.7% higher than yesterday and 25.6% higher from last week
  • Short positions are 7.3% lower than yesterday and 0.5% higher from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Spot Gold prices may continue to fall. Traders are further net-long than yesterday & last week, and the combination of current positioning and recent changes gives us a stronger Spot Gold (XAU/USD)-bearish contrarian trading bias from a sentiment standpoint.

See how shifts in Gold retail positioning are impacting trend- Learn more about sentiment!

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Previous Weekly Technical Charts

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--- Written by Michael Boutros, Technical Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex

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

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