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Gold Price Forecast: Precious Metal Consolidates Ahead of Next Big Move

Gold Price Forecast: Precious Metal Consolidates Ahead of Next Big Move

Peter Hanks, Strategist

Gold Price Outlook:

  • Gold trades near the midpoint of a descending channel it has etched out since August
  • While shorter term traders can look to maneuver using nearby technical levels, the gradual decline may persist until a break out in either direction is staged
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Gold Price Forecast: Precious Metal Consolidates Ahead of Next Big Move

In an otherwise choppy trading session to start the week, gold has leveled off around the $1860 mark which roughly coincides with the midpoint of a potential descending channel. The possible formation is drawn from the August high and low to the November trough and January peak and could continue to guide the precious metal lower in the weeks to come. With that in mind, nearby technical levels could help traders position should the gradual bleed lower persist.

Gold (XAU/USD) Price Chart: 4 – Hour Time Frame (August 2020 - January 2021)

gold price chart before fomc

How to Trade Gold: Top Gold Trading Strategies and Tips

Early resistance might lie at the Fibonacci levels near $1883 and $1920. The $1956 level may be more important, however, as it coincides with the metal’s peaks in November and January. Thus, it can be argued it is the “line in the sand” that, if broken, could open the door to a longer-term continuation higher as it would curb the series of lower-highs that have been established and serve as a bullish break out of the potential descending channel.

Gold Price Forecast: XAU/USD Recovers but is the Rally to be Believed?

Unless such a break is staged, the multitude of resistance overhead could provide potential entry points for bearish exposure in the weeks ahead - barring a concrete change in the fundamental landscape – with levels of invalidation set above the $1956 area. Wednesday’s Federal Open Market Committee meeting possesses the gravity required to spark such a change, however, and should be monitored closely as a result. Any indication from the central bank that they will tweak their current operations could have significant implications for XAU/USD.

Should gold decline in the wake of the FOMC meeting, support likely resides along the Fibonacci level at $1838 with subsequent levels near $1800 and $1764. A break beneath the latter would constitute a considerable technical development that could open the door to a deeper retracement. 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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