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In this series we scale-back and look at the broader technical picture to gain a bit more perspective on where we are in trend.Gold prices are posed to mark a third consecutive weekly advance with the precious metal up 0.24% to trade at 1283 ahead of the New York close on Friday. Here are the key targets & invalidation levels that matter on the Gold (XAU/USD) weekly chart as heading into January trade.

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Gold Weekly Price Chart (XAU/USD)

Gold Weekly Price Chart

Notes:In my most recent Gold Technical Outlook we noted that our focus was higher in price while above 1236 with topside targets, “eyed the upper parallel (blue) / 1.618% extension of the yearly advance at 1268/70.” Gold ripped through this zone into the close of the year with the advance failing just ahead of the 2018 open at 1302 this week.

Note that weekly RSI has risen to its highest level since 2017 and although the breakout of the 2017 / 2018 pitchfork (blue) does leave the focus higher, the immediate advance may be vulnerable if price closes the week below the key 61.8% retracement of the 2018 range at 1287. Look for support back at the highlighted confluence region along the 52-week moving average at ~1269 – weakness beyond this point would risk a more significant setback with broader bullish invalidation steady at 1236.

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Bottom line:IF this breakout is legit, price would need to stabilize above 1269 with topside targets at 1302 backed by 1322. From a trading standpoint, Friday is poised to mark an outside-day reversal and highlights the threat for further weakness near-term. Ultimately, we’ll be looking for weakness to offer more favorable entries lower down near confluence support.

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Gold Trader Sentiment

IG Client Sentiment
  • A summary of IG Client Sentiment shows traders are net-long Gold - the ratio stands at +2.84 (74.0% of traders are long) – bearish reading
  • Long positions are 7.9% lower than yesterday and 5.8% lower from last week
  • Short positions are 6.7% lower than yesterday and 1.5% 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 and compared with last week. Recent changes in sentiment warn that the current Gold price trend may soon reverse higher despite the fact traders remain net-long.

See how shifts in Gold retail positioning are impacting trend- Learn more about sentiment!

Learn how to Trade with Confidence in our Free Trading Guide

--- Written by Michael Boutros, Technical Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex

Other Weekly Technical Forecasts:

Australian Dollar Forecast: AUD/USD, AUD/CAD & EUR/AUD Prices Eye Technical Reversal Patterns

British Pound Forecast:20-Month Spike Low May Be Re-Tested

US Dollar Forecast: Dollar Preparing to Break from its Most Restrictive Range In Four Years

Equity Forecast: Technical Forecast for Dow, S&P, DAX, FTSE 100 and Nikkei

New Zealand Dollar Forecast: NZDUSD to Continue Slide, NZDCAD Faces 2016 Resistance