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Gold Technical Outlook: Price Breakout Approaching Initial Targets

A breach above the November range takes gold prices near five-month highs. Here are the targets & invalidation levels that matter on the XAU/USD charts next week.

A breach above the November range highs has taken gold prices to levels not seen since mid-July and keeps the focus higher heading into next week. These are the updated targets and invalidation levels that matter on the XAU/USD charts.

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Gold Daily Price Chart (XAU/USD)

Daily Chart of Gold

Technical Outlook: In our last Gold Technical Outlook we noted that a breakout was imminent as price was testing the October trendline. Out ‘bottom line’ cited that “The monthly opening-range remains intact heading into the November close. For now, look for a break of this week’s range for guidance with our broader focus higher while within this ascending pitchfork formation. From a trading standpoint, I continue to favor fading weakness while above 1210.”

Gold rallied through critical resistance early in the week with the advance taking out the November range highs on the way. Daily resistance targets are eyed at the August 2017 low at 1252 backed by the 200-day moving average and the 50% retracement of the yearly range at 1262. Broader bullish invalidation now raised to 1214.

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Gold 240min Price Chart (XAU/USD)

4 hour chart of gold

Notes:A closer look at price action sees the advance off the November lows holding within the confines of this slope series (red) and suggests the immediate advance may be vulnerable here heading in to the close of the week. Interim support rests at 1236 – a break there would suggest a larger pullback towards the lower parallels at 1227 and the monthly open at 1221- the near-term focus remains higher while above this level with a topside breach targeting subsequent resistance objectives at 1252, 1260 and 1262.

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Bottom line: We’ll favor fading weakness near-term while above the monthly open targeting the upper parallels. From a trading standpoint, a good place to reduce long-exposure / raise protective stops; IF we get a pullback, look for more favorable entries towards slope support next week.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

Gold Trader Sentiment

Gold Technical Outlook: Price Breakout Approaching Initial Targets
  • A summary of IG Client Sentiment shows traders are net-long Gold - the ratio stands at +3.14 (75.8% of traders are long) – bearishreading
  • Long positions are4.4% lower than yesterday and 6.4% lower from last week
  • Short positions are 3.6% higher than yesterday and 35.0% higher from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Gold prices may continue to fall. Yet traders are less net-long than yesterday & compared with last week and the recent changes in sentiment warn that the current Gold price trend may soon reverse higher despite the fact traders remain net-long.

- Written by Michael Boutros, Currency Strategist with DailyFX

Follow Mchael on Twitter @MBForex or contact him at mboutros@dailyfx.com

Other Weekly Technical Forecast:

Australian Dollar Forecast – AUD/USD, AUD/JPY and EUR/AUD Trend Lines Broken

British Pound Forecast – Sterling Remains Weak

US Dollar Forecast – Dollar Wind Up Threatens to Resolve with a Break Before 2018 Ends

Equity Forecast – Technical Forecast for the S&P 500, Dow Jones, DAX 30 & FTSE