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Gold Price Outlook: XAU/USD Rebound Struggles as Bearish Chart Formation Builds

Gold Price Outlook: XAU/USD Rebound Struggles as Bearish Chart Formation Builds

Nick Cawley, Senior Strategist

Gold Price Outlook, Price and Chart

  • US dollar pushing higher after Q1 rebalancing.
  • Bearish engulfing candle being formed.
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Gold Struggling to Push Higher

Gold slumped Tuesday, prompted by a report that the Bank of Russia had suspended buying gold in the domestic market, putting bears back in control of the market. Various reports suggest that Russia has bought more than 40 billionUS dollars’ worth of gold in the last five years as it looks to diversify its reserves away from the US dollar. The price of gold hit a one-week low of $1,567/oz. on Tuesday before rebounding marginally later in the session. Volatility in the US dollar yesterday ahead of Q1 portfolio rebalancing added extra volatility into the mix, before the greenback picked up another safe-haven bid, adding downward pressure on gold.

The daily chart shows gold currently oscillating between two Fibonacci retracements levels – 61.8% retracement at $1,607/0z. and 50% retracement at $1,577/oz. A further bearish set-up is building with Tuesday’s range showing a bearish engulfing candle holding sway. Gold is also moving between the 20- and 50-dmas. To break the engulfing candle, gold needs to trade and close above $1,620/oz. which is looking increasingly unlikely as things stand. The precious metal may find a bid if risk-assets get sold-off on heightened coronavirus fears. Volatility remains high, using the ATR indicator, while the market is neither oversold or overbought.

Strong risk management is a prerequisite when trading gold in these highly volatile times and traders should consider their trading size and stop-losses very carefully.

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Gold Daily Price Chart (August 2019 – April 1, 2020)

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What is your view on Gold – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

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

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