Gold Price Forecast:
- A failed run at the 23.6% Fibonacci level and the $1,300 psychological leveled played a part in driving gold substantially lower in Thursday and Friday trading
- Simultaneously, a series of encouraging trade-war developments crossed the news wires and likely weighed on demand for safety
- Still, retail traders are overwhelming net-long on Gold, find out how to use IG Client Sentiment Data with one of our Live Sentiment Data Walkthroughs
Gold Price Plummets, Seeks Technical Support Near May Lows
After a failed drive higher in Wednesday trading, gold prices have been battered as the week draws to a close. As forecasted, a series of technical resistance levels combined with the $1,300 psychological level worked in tandem to rebuke a continuation higher. With gold trading to its lowest price since May 3, and on pace for its largest intraday loss since April 16, the metal now grasps for support.
Gold Price Chart (XAUUSD): Daily Time Frame (January 2019 – May 2019) (Chart 1)
Gold price intraday percentage change in blue
To that end, the safe-haven asset has some options to work with. First, the 38.2% retracement at $1,275 – counterpart to the 23.6% that stalled Wednesday and Thursday’s attempted moves higher – offers immediate support. A close above $1,275 would be an encouraging sign for gold bulls heading into next week. Similarly, an ascending trendline from the August 2018 lows will provide further buoyancy. Although gold prices probed beneath the trendline in early May, a close above in Friday trading would meaningfully bolster the support offered in the $1,275 to $1,278 range.
View A Brief History of Trade Wars to read about the precedents set in prior economic conflicts.
However, should selling continue and those levels are rendered obsolete, subsequent support will be offered by the 50% Fib level at $1,263 and prior to that, a modicum of support may be offered at May lows around $1,268. While there is no lack of support, a break beneath the descending trendline originating from February 20, may seek to reassert its dominance over the technical landscape.
Gold Price Chart (XAUUSD): 4 - Hour Time Frame (February 2019 – May 2019) (Chart 2)
Since February, the trendline has guided gold prices lower, rebuking multiple attempts higher - until gold’s rally on Monday. The surge corresponded with the largest S&P 500 gap lower since 2009, which was seemingly a sufficient catalyst to drive prices above the trendline. But as the week progressed and trade-war risks have calmed, equities have rebounded, and safe-haven demand has receded.
At the same time, the US Dollar has found its footing – surmounting a key trendline of its own - adding to downward pressure on gold. If the fundamental landscape remains stable next week, expect gold to flounder between the different technical levels as traders seek to determine which garners the most respect. In the meantime, follow @PeterHanksFX on Twitter for updated analysis and technical levels on gold.
--Written by Peter Hanks, Junior Analyst for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX
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