Gold Price Outlook: Breakout Potential as XAU/USD Consolidates
- Gold prices in consolidation within the monthly opening range- Outlook constructive above 1180
- Check out our 3Q projections in our Free DailyFX Gold Trading Forecasts
- Join Michael for Live Weekly Strategy Webinars on Mondays at 12:30GMT
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
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.
New to Forex Trading? Get started with this Free Beginners Guide
Gold 240min Price Chart
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.
Why does the average trader lose? Avoid these Mistakes in your trading
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.
For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy
Gold 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!
Active Trade Setups
- Crude Oil Price Outlook: WTI Reversal Approaching Initial Targets
- EUR/USD Price Outlook: Euro Continuation Prospects after Fresh Highs
- USD/CAD Price Outlook: Loonie Threatens Breakout on Easing Trade Tensions
- Written by Michael Boutros, Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex or contact him at firstname.lastname@example.org
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.