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XAU/USD: Gold Price Charts on the Cusp of Major Breakout

XAU/USD: Gold Price Charts on the Cusp of Major Breakout

2019-10-18 22:00:00
Rich Dvorak, Junior Analyst
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XAU/USD – GOLD PRICE CHART ANALYSIS & WEEKLY TECHNICAL OUTLOOK:

  • The price of gold has edged roughly 4% lower since the precious metal printed its year-to-date high of $1,557.10 on September 4
  • XAU/USD remains up well over 15% so far for 2019 and the recent pullback in spot gold prices looks like a healthy consolidation before embarking on its next major move
  • Be sure to check out these Top Gold Trading Strategies

Spot gold price action has struggled to advance since the commodity’s impressive rally came to a screeching halt early last month. Upside in XAU/USD has been driven primarily by plummeting real yields, which has resulted generally from slowing global GDP growth and slumping inflation expectations. The price of gold has receded considerably over the past few weeks, however, as fading risk aversion following hopes of a US-China trade war breakthrough coupled with the unwinding of overextended net-long gold speculative positions.

While fundamentals tend to serve as the principal catalysts that spark big breakouts, analyzing price charts can uncover a great deal of insight on the latest trends in supply and demand (i.e. buying and selling pressures) among market participants. When doing so, it seems more likely than not that the drift lower in spot gold prices since early September will simply chalk up to be a healthy pullback before making its next leg higher.

XAU/USD: SPOT GOLD PRICE CHART: WEEKLY TIME FRAME (NOVEMBER 27, 2017 TO OCTOBER 18, 2019)

Spot Gold Price Chart Technical Forecast XAU/USD

Chart created by @RichDvorakFX with TradingView

XAU/USD could look to confluence around the $1,465-1,480 price zone to potentially keep the precious metal afloat. This area of technical support is underpinned by spot gold’s 12-week exponential moving average and 23.6% Fibonacci retracement of its trading range since bottoming mid-August 2018. Technical support could also be provided by the rising trendline that connects the string of higher lows throughout July.

Despite the abrupt shift in market sentiment and influx of trader optimism, gold prices appear to have held up relatively well all else considering. Lingering investor demand for gold may be evidenced by the long-wicked candle printed at the end of September while the latest doji candlestick recorded this past week could indicate trader indecision about the ongoing pullback. The Bollinger Band compression also speaks to the recent consolidation in spot gold prices, which may continue as XAU/USD reverts back toward its 20-week simple moving average.

XAU/USD: SPOT GOLD PRICE CHART – DAILY TIME FRAME (FEBRUARY 13, 2019 TO OCTOBER 18, 2019)

XAUUSD Gold Price Chart Technical Outlook

Chart created by @RichDvorakFX with TradingView

Also, worth noting is how the consolidation in XAU/USD seems to closely mirror the marginal pullback from its February high earlier this year. Moreover, a daily chart of spot gold price action shows how the commodity is currently gravitating around its 50-EMA and 23.6% Fibonacci retracement of its May to September rally. Fading bearish divergence pointed to by the MACD indicator might also suggest that gold’s pullback may soon pivot higher.

If the price of gold continues to drift lower, however, the safe-haven may potentially catch bid around its 100-EMA, 38.2% Fib, and downward-sloping support line connecting the August 13 and October 1 intraday swing lows. On the other hand, a topside breakout above descending trendline resistance extended from gold’s lower highs over the last two months could open up the door to retest year-to-date highs.

GVZ: GOLD VOLATILITY INDEX PRICE CHART – DAILY TIME FRAME (AUGUST 24, 2018 TO OCTOBER 18, 2019)

Gold Price Volatility Index Price Chart XAUUSD and GVZ Technical Analysis

Chart created by @RichDvorakFX with TradingView

Along with watching the relationship between spot gold prices, interest rate expectations and real yields, traders could also keep tabs on GVZ – Cboe’s 30-day implied gold price volatility index – for a potential bellwether to where XAU/USD might head next. There is typically a strong positive correlation between spot gold and gold volatility. That said, a breakout in volatility could drag the price of gold higher too.

GOLD TRADING RESOURCES & ADDITIONAL READING:

-- Written by Rich Dvorak, Junior Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

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

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