- Gold price breakout remains vulnerable sub-1451 – broader outlook constructive above 1350
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Gold prices rallied more than 1.4% with the precious metal poised to mark an outside weekly-reversal on the largest single-week advance since the mid-June breakout. Despite the recent surge, gold prices have continued to hold below long-term technical resistance heading into the August open. These are the updated targets and invalidation levels that matter on the XAU/USD weekly price chart heading into the close of the month. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this gold price setup and more.
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Gold Price Chart - XAU/USD Weekly
Notes: In my last Gold Weekly PriceOutlook we noted that, “While the broader outlook remains weighted to the topside, Gold prices remain vulnerable for further weakness near-term after reversing off longer-term resistance targets last week at 1451.” Price registered a low this week at 1400 before reversing sharply with the advance once again failing just ahead of the 100% extension of the 2015 advance at 1451 late in the week.
Initial support steady at 1392 backed by 1380 – look for a reaction there IF reached. Broader bullish invalidation keeps at 1350. A topside breach above this threshold is needed to keep the immediate long-bias viable with such a scenario targeting the 50% retracement at 1483 and 1500.
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Bottom line: Gold is testing confluence uptrend resistance yet again- watch the weekly close. IF gold settle this resistance zone, the risk would remain for a larger pullback in price. From a trading standpoint, a good place to reduce long-exposure / raise protective stops. Look for a reaction / pivot off the 75% parallel / 1451 for guidance heading into the August opening-range with a breach needed to mark resumption of the broader uptrend (likely to be an accelerated move if we get it). Review my latest Gold Price Outlook for a closer look at the near-term XAU/USD technical trading levels.
Gold Trader Sentiment (XAU/USD)
- A summary of IG Client Sentiment shows traders are net-long Gold - the ratio stands at +1.96 (66.2% of traders are long) – bearish reading
- Long positions are 9.1% lower than yesterday and 19.1% lower from last week
- Short positions are 4.2% higher than yesterday and 7.8% 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. Yet traders are less net-long than yesterday & compared with last week. From a sentiment standpoint, the recent changes in positioning warn that the current Spot Gold price trend may soon reverse higher despite the fact traders remain net-long.
See how shifts in Gold retail positioning are impacting trend- Learn more about sentiment!
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--- Written by Michael Boutros, Technical Currency Strategist with DailyFX
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