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Gold is testing critical down-trend resistance and we’re looking to validate a possible breakout. Here are the levels that matter on the XAU/USD weekly chart.

Looking for a fundamental perspective on Gold? Check out the Weekly Gold Fundamental Forecast.

Gold prices are posed to close higher this week with the precious metal up 1.3% to trade at 1298 ahead of the New York close on Friday. Here are the key targets & invalidation levels that matter on the Gold (XAU/USD) weekly chart.

New to Gold Trading? Get started with this Free How to Trade Gold -Beginners Guide

Gold Weekly Price Chart (XAU/USD)

Gold Weekly Price Chart

Notes:In my previous Gold Technical Outlook we noted that that a “near-term price consolidation looks to have broken late in the week and leaves the immediate risk lower while below pitchfork resistance. From a trading standpoint, the focus is on a reaction down at the yearly open / monthly opening range.” Price tested the January lows twice before reversing sharply higher later in the week with the advance now challenging broader slope resistance.

The outlook remains unchanged ahead heading into the close of January trade the focus is on a close above the 2018 open at 1302 to validate a larger breakout in price. Note that gold is poised to mark an outside-weekly reversal into resistance and highlights the threat of near-term exhaustion next week if price fails to close above.

Weekly support rests at the confluence of the 52-week moving average and the 23.6% retracement of the August advance at~1266- weakness beyond this threshold would risk a larger correction in price with broader bullish invalidation steady at 1236 - where the 200-week moving average and December 2017 low converge on channel support. A breach/close above 1302 still needed to validate the breakout with such a scenario eyeing initial Fibonacci resistance at 1322.

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

Bottom line:Gold is attempting to breach multi-month downtrend resistance – failure to surpass 1302 on a close basis would leave the advance vulnerable again near-term. Ultimately, IF we get a larger set-back, look for more favorable long-entries with our broader outlook calling for a breach of this formation. Review my latest Gold Price Outlook for a closer look at the near-term trading levels.

Gold Trader Sentiment

IG Client Sentiment
  • A summary of IG Client Sentiment shows traders are net-long Gold - the ratio stands at +2.02 (66.9% of traders are long) – bearish reading
  • The percentage of traders net-long is now its lowest since January 17th
  • Long positions are 15.4% lower than yesterday and 14.9% lower from last week
  • Short positions are 1.7% higher than yesterday and 4.7% 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.

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

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

Follow Michael on Twitter @MBForex

Other Weekly Technical Forecasts:

Australian Dollar Forecast - AUD/USD, EUR/AUD, AUD/JPY Chart Support and Resistance Reinforced

Crude Oil Forecast - Sharp Rebound Appears Set To Continue

British Pound Forecast - Preparing For Further Upside?

US Dollar Forecast - Dollar Ends Week With Its Worst Drop in 4 Months, Still Not a Break