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Gold Price Forecast: Bullish Outlook in Question After Key Technical Break

Gold Price Forecast: Bullish Outlook in Question After Key Technical Break

Peter Hanks, Analyst

Gold Price Outlook:

  • Gold fell beneath $1,800 for the first time since mid-July last week despite USD weakness
  • While the fundamental landscape remains largely unchanged, the technical break might undermine the metal’s bullish outlook
  • If the longer-term continuation higher is to continue, the next line in the sand might be $1,750

Gold Price Forecast: Bullish Outlook in Question After Key Technical Break

Gold has climbed nearly 20% in the year-to-date, but its performance since August has been far from stellar. In the shortened timeframe, gold has fallen roughly -7.5% from $1,975 to $1,830. Still, little has changed on the fundamental front so the outlook during this time period was largely one of optimism as traders waited for consolidation to take place before the next move higher.

Gold (XAU/USD) Price Chart: 4 – Hour Time Frame (April 2020 - December 2020)

gold price chart

That being said, gold’s recent breakdown beneath $1,800 may have dealt a serious blow to yellow metal from a technical perspective. Previously, I had outlined $1,800 as an important barrier that might see losses accelerate if bears could pierce the level. Well, last week’s trip beneath $1,800 saw gold fall to $1,760 quickly which has undermined the longer-term technical picture in my opinion.

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As a result, subsequent support around the $1,750 mark might be required should selling gain pace once more. To the topside, a recovery higher might encounter resistance around $1,850 and $1,920. Prior to any recovery of that size, gold may have to negotiate the descending trendline drawn off the August and September lows. Already, the level has offered some degree of influence this week.

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Either way, gold has begun a recovery that might prove vital for the longer-term outlook of the precious metal. In the meantime, follow @PeterHanksFX on Twitter for updates and analysis.

--Written by Peter Hanks, Strategist for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

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

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