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Gold Price Outlook Talking Points:

  • Gold prices put in a bullish flare around last week’s open as stocks gapped-lower, highlighting a risk-aversion bid in Gold price that has since dissipated.
  • Price action soon pushed back to the bullish trend-line that helped to hold the low earlier in May, but with that trend-line now taken-out, the big question is whether bears can continue to push down to the May low or, perhaps even lower.
  • DailyFX Forecasts are published on a variety of currencies such as Gold, the US Dollar or the Euroand are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

Do you want to see how retail traders are currently trading Gold? Check out our IG Client Sentiment Indicator.

Gold Prices Breach Bullish Trend-Line as Risk Aversion Takes a Pause

Gold prices are back on the offer after an early-month flare of strength has fallen flat. Gold prices limped into the month of May following a rough two-and-a-half month stretch. In mid-February, a large pullback showed-up that took prices from a high of 1346.75 all the way down to a support zone that runs from 1275-1280. That support helped to hold the low in the opening days of March, and the ensuing bounce saw the build of a lower-high, taken from around the 1325 level. Another return to support in early-April showed a similar theme, as a lower-high developed on the corresponding bounce, and sellers were soon in the driver seat, pushing Gold prices down to a fresh 2019 low in the opening days of May.

Gold prices soon found support on a bullish trend-line. This trend-line can be found by connecting the August-November swing lows from last year; and the projection of this line helped to arrest the declines in early-May. And as looked at a couple of weeks ago, a series of shorter-term higher-lows that built after that support inflection opened the door for a bullish response.

Gold Price Eight-Hour Chart

Gold price eight hour chart

Chart prepared by James Stanley

Gold prices ran into resistance on Monday evening last week, taken from the 1302.76 level, which is the 23.6% retracement of the August 2018 – February 2019 major move. And as risk aversion continued to pullback, as indicated by strength in US equities following last week’s gap-lower, Gold prices soon returned back down to that key support zone, hold around the 1275 level into the close of last week.

This week has thus far seen continued weakness, and sellers have now pushed Gold prices below the bullish trend-line that’s held the lows for the past nine months. This exposes a double bottom at 1266.10, which is currently functioning as the 2019 low in Gold.

Gold Price Four-Hour Chart

gold price four hour chart

Chart prepared by James Stanley

Gold Prices Carry Breakdown Potential

Below current price action is a confluent zone of interest that shows around the 1253 level. The price of 1253.56 is the 50% retracement of the same major move that offered resistance at the 23.6% level and support at the 38.2% marker during last week’s trade. But just below that, at 1252.90, is the 76.4% retracement of the 2011-2015 major move.

Gold Price Daily Chart

Gold price daily chart

Chart prepared by James Stanley

Retail Traders Betting on a Bounce – Keeping Focus on Bearish Themes

At this point, retail traders are heavily anticipating a bounce in Gold prices, and this could make the short-side theme that much more attractive. Approximately 79.5% of retail traders in the IGCS sample are holding net-long exposure, amounting to a ratio of 3.87-to-1. This further highlights bearish potential in the yellow metal as, at some point, as at least some of these traders are likely nearing capitulation with fresh lows coming into play. There are likely a number of stops sitting just below 1266.10, and if that price is taken-out, those sitting orders could further propel prices-lower.

Gold Price IG Client Sentiment

gold price ig client sentiment

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts have a section for each major currency, and we also offer a plethora of resources on Gold or USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers an abundance of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

--- Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX