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Gold Price Outlook: Gold Breaks Out, Goes Overbought - Levels to Know

Gold Price Outlook: Gold Breaks Out, Goes Overbought - Levels to Know

2019-06-03 13:30:00
James Stanley, Currency Strategist
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Gold Price Outlook Talking Points:

Gold Price Breaks Out to Fresh Two-Month-Highs

Gold prices put in a strong day of price action on Friday and that theme of strength has continued into the open of a new month and week. The big point of interest at present is whether the longer-term up-trend is getting back in order, as Gold prices stayed on a bullish track from August of last year to February of this year, eventually topping-out around the 76.4% retracement of the August 2013 – December 2015 major move at 1342.74.

From mid-February into late-May, Gold prices continued to exhibit digestion, with carrying breakdown potential as sellers tested below a key support zone around the 1275 level. But, after a double bottom formed at 1266.10, with early-May price action seeing another failure to breakdown at that price, buyers have gotten back in the driver’s seat to push up to fresh two-month-highs, making a fast approach at the 1320 level around which exists the 14.4% Fibonacci retracement of the August-February major move.

Gold Price Daily Chart

gold price daily chart

Chart prepared by James Stanley

Gold Price Breaks Out of Wedge After Thursday Support Test

It was just last Thursday that Gold prices were testing a key area of support around 1275.55. This is the 38.2% retracement of the August-February major move, and this level had been in-play in various ways over the past month; helping to hold support in mid-April before showing as short-term resistance in late-May. The 23.6% retracement of that same major move has had some recent impact, as well; as the May swing-high posted very near this spot on the chart. As discussed on Wednesday, a break above the Fibonacci level at 1302 exposes the next Fibonacci level in that sequence around 1320.

The big question now is whether buyers can continue to push. Gold prices are overbought by a variety of metrics, with RSI on the four-hour at its highest level since January of 2018, and RSI on the hourly chart has already begun to diverge. This can make for a difficult spot if looking to take on long exposure in Gold prices at the moment.

Gold Price Four-Hour Price Chart

gold price four hour chart

Chart prepared by James Stanley

Gold Price Strategy Moving Forward

Given the backdrop, there could be a couple of different ways of approaching Gold prices at the moment. For those looking at bullish scenarios, that prior level of resistance around the Fibonacci level at 1302 could be re-utilized as higher-low support potential. Alternatively, for traders looking at breakout scenarios even despite the overbought readings that have begun to show, a topside breakout through the Fibonacci level at 1319.91 could expose the March swing-high at 1324.56. At that point, break-even stop moves can be investigated with the potential for additional topside breakout potential.

Gold Price Hourly Chart

Gold price hourly chart

Chart prepared by James Stanley

On a longer-term basis, the 2019 swing-high comes in just shy of a big batch of resistance that runs from 1357.50-1366.06, which has helped to hold the highs in Gold prices since August of 2016. This would be an area where bulls would likely want to re-evaluate stance given the historical precedent of this zone capping prior advances.

Gold Price Weekly Chart

Gold price weekly chart

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.

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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

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

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