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Gold prices have continued to trade within a well-defined formation we’ve been tracking for months now with our immediate focus on a breakout of the monthly range. Here are the updated targets and invalidation levels that matter on the XAU/USD charts heading into the close of the week.

Gold Daily Price Chart

Gold Price Chart - Daily

Technical Outlook: In our previous Gold PriceTechnical Outlook our bottom line noted that the, “Immediate risk is lower from here but ultimately a pullback should offer more favorable long-entries while above 1180.” Price marked a low at 1187 before rebounding sharply last week with our focus now on a break of the September opening-range.

Key daily resistance targets are unchanged at 1214/15 and 1221- a breach there is needed to fuel the next leg higher with such a scenario eyeing initial resistance objectives at the December lows at 1236. Support rests at 1189 backed by the 61.8% retracement1180. Keep in mind seasonal tendencies do favor strength in gold prices this month and bullion is trading just above the September open at 1200.

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Gold 240min Price Chart

Gold Price Chart - 240min

Notes: A closer look at price action sees gold trading within the confines of a possible consolidation formation since the start of the month with price testing resistance at the 50-line of the descending pitchfork formation we’ve been tracking off the yearly highs. The focus is on a break of this formation for guidance with near-term bullish invalidation steady at 1180. Interim support rests at 1193 with 1190 and 1186 both areas of interest for exhaustion / long-entries if reached.

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Bottom line: Gold prices remain in consolidation here but ultimately a topside breach of the monthly range is needed to validate a run towards more significant slope resistance. Expect further sideways price action over the next few days. From a trading standpoint, I’ll favor fading weakness while above the median-line at 1180 with a topside breach above 1221 needed to open up a larger advance. A break below the yearly low-day close at 1173 would be needed to mark resumption of the broader downtrend.

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Gold Trader Sentiment

Gold Price Trader Sentiment
  • A summary of IG Client Sentiment shows traders are net-long Gold - the ratio stands at +2.19 (68.7% of traders are long) – bearishreading
  • Long positions are4.0% lower than yesterday and 59.8% lower from last week
  • Short positions are 20.2% higher than yesterday and 4.0% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Spot Gold prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week and therecent 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!

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- Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex or contact him at mboutros@dailyfx.com