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Gold Price Forecast: XAU/USD Recovery Faces First Test

Gold Price Forecast: XAU/USD Recovery Faces First Test

2020-10-10 16:00:00
Michael Boutros, Strategist
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Gold Technical Price Outlook: XAU/USD Weekly Trade Levels

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Gold prices are poised to mark a second consecutive weekly advance with XAU/USD rallying more than 1.3% to trade at 1925 ahead of the New York close on Friday. The recent advance keep price within the confines of the broader August decline however and the focus is on a reaction just higher near downtrend resistance. These are the updated targets and invalidation levels that matter on the gold weekly charts. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this gold technical setup and more.

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Gold Price Chart - XAU/USD Weekly

Gold Price Chart Outlook XAU USD

Chart Prepared by Michael Boutros, Technical Strategist; Gold on Tradingview

Notes: In last month’s Gold Weekly PriceOutlook we noted that XAU/USD had, “broken lower and while the broader technical structure is constructive, the risk remains for a deeper correction before resumptionlook for topside exhaustion on recoveries ahead of 1932 IF price is indeed heading lower.” Gold registered a low at 1848 before rebounding with the recovery now approaching a technical confluence at channel resistance / August weekly-reversal close at 1932- looking for a reaction up here.

A topside breach / close above would be needed to keep the rally viable with such a scenario exposing subsequent resistance objectives at the 61.8% Fibonacci retracement at 1988 and the record high-week close at 2034. Support unchanged at 1836 and the 2020102 high /. 100% extension at 1795-1803- both levels of interest for possible downside exhaustion IF reached.

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Bottom line: Gold prices have rebounded off channel support with the recovery now approaching downtrend resistance- look for inflection on a test of 1932 for guidance. From a trading standpoint, a good zone to reduce long-exposure / raise protective stops- be on the lookout for topside exhaustion into channel resistance IF prices is still heading lower. Ultimately, a larger correction may offer more favorable opportunities closer to uptrend support. A topside breach would likely fuel an accelerated rally here- stay nimble. Review my latest Gold Price Outlook for a closer look at the near-term XAU/USD technical trading levels.

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

Gold Trader Sentiment – XAU/USD Price Chart

Gold Price Chart XAU USD
  • A summary of IG Client Sentiment shows traders are net-long Gold- the ratio stands at +3.01 (75.09% of traders are long) – bearishreading
  • Long positions are9.42% lower than yesterday and 8.60% lower from last week
  • Short positions are11.07% higher than yesterday and 13.67% 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.
Gold BULLISH
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -13% 4% -10%
Weekly 2% 9% 3%
Learn how shifts in Gold retail positioning impact trend
Get My Guide

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Previous Weekly Technical Charts

- Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex

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

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