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Gold Forecast: XAU/USD Price Consolidation Set to Snap

Gold Forecast: XAU/USD Price Consolidation Set to Snap

Rich Dvorak, Analyst


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Gold Price Forecast - Precious Metals Pressured as US Dollar Stabilizes; Chart Support in Sight

Gold and silver prices have slumped to start the month of September

•XAU/USD price action peels back and probes a key support zone

•Precious metals could struggle if the US Dollar takes off

Precious metals stumbled lower last week with gold and silver prices declining about 2% a piece. The two shiny commodities failed to catch a bid despite broad-based investor risk aversion underpinned by a sharp pullback in major stock indices. Perhaps the powerful rebound staged by the US Dollar to start the month of September weighed negatively on XAU/USD price action.

Gold prices might face further headwinds if the Greenback can extend its aggressive rise off two-year lows. Another downside risk that could undermine gold price action includes potential for a widespread market sell-off earmarked by a ‘dash to cash.’

Gold Price Chart with US Dollar Index Overlaid: Daily Time Frame (28 Apr to 04 Sep 2020)

Gold Price Chart XAU USD Forecast

Chart created by @RichDvorakFX with TradingView

That said, a daily gold chart shows the precious metal perched upon a key support zone. The $1,915-price level stands out as a critical area of technical support that could stymie gold selling pressure. This area of confluence around the $1,900-handle is highlighted by August lows. Not to mention, gold price action has notched a series of higher lows on a closing basis over the last few trading sessions, which likely helps keep upward biases intact.

Gold Bearish
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 10% 8% 9%
Weekly 24% -14% 4%
What does it mean for price action?
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Gold Price Chart: Daily Time Frame (28 Apr to 05 Sep 2020)

Gold Price Chart Forecast Technical Analysis

Chart created by @RichDvorakFX with TradingView

Yet, the precious metal has recorded a string of lower highs as well, with gold consolidating lower from its all-time high above $2,000/oz printed early last month. This conflict between short-term rising and falling trend lines appears to have formed a symmetrical triangle pattern. Also, as gold bulls and bears battle over bullion’s next direction, trader indecision appears to have formed a doji candlestick on Friday. Also, gold is now wedged between its bullish medium term 50-day moving average and bearish 20-day moving average.

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Reclaiming the 20-day moving average could open up the door for a retest of the psychologically-significant $2,000-price level before record highs come back into consideration. Breaching the 50-day moving average and 12 August intraday swing low could indicate a larger pullback may be in the cards for gold price action.

Keep Reading: Gold Forecast Bright & Volatile as USD, Real Yields Swing

-- Written by Rich Dvorak, Analyst for

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.