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Gold has rallied more than 3.3% month-to-date with price stretching to fresh five-month highs on the back of yesterday’s FOMC interest rate decision. The advance is approaching initial resistance targets and although they may limit the topside near-term, the broader outlook remains constructive. These are the updated targets and invalidation levels that matter on the XAU/USD charts into the close of the year. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

New to Gold Trading? Get started with this Free How to Trade Gold -Beginners Guide

Gold Daily Price Chart (XAU/USD)

Gold Daily Price Chart - XAU/USD

Technical Outlook: In our last Gold Technical Outlook we noted that we were, “on the lookout for price exhaustion while above 1236 with a breach above 1252,” targeting subsequent topside resistance targets at, “1260 and the 50% retracement of the yearly range at 1262.” Gold registered a high at 1261.99 today before pulling back and while the broader focus remains weighted to the long-side, the immediate advance may be vulnerable while below this threshold near-term.

Daily support rests at 1236/38 with broader bullish invalidation now raised to the December open at 1221. A topside breach above of this formation would likely fuel accelerated gains in price with such a scenario eyeing subsequent resistance objectives at the 2015 slope line (currently ~1270s) and the 61.8% retracement at 1286.

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Gold 240min Price Chart (XAU/USD)

Gold 240min Price Chart - XAU/USD

Notes: A closer look at price action highlights immediate resistance at 1262 with a more significant confluence zone eyed just higher the upper parallel (blue) / 1.618% extension of the yearly advance at 1268/70. Look for a larger reaction there IF reached.

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Bottom line: The broader focus is higher in gold, but the immediate advance is approaching initial resistance targets which could limit the topside near-term. From a trading standpoint, we’ll continue to favor fading weakness while above 1236 targeting the upper parallels. For a look at the longer-term trading levels, review my latest Gold Weekly Technical Outlook.

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

Gold Trader Sentiment

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  • A summary of IG Client Sentiment shows traders are net-long Gold - the ratio stands at +3.22 (76.3% of traders are long) – bearishreading
  • Long positions are 3.9% lower than yesterday and 6.8% lower from last week
  • Short positions are 9.2% lower than yesterday and 0.3% lower 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 more net-long than yesterday but less net-long from last week and the combination of current positioning and recent changes gives us a further mixed Spot Gold trading bias from a sentiment standpoint.

See how shifts in Gold retail positioning are impacting trend- Learn more about sentiment!

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Active Trade Setups

- Written by Michael Boutros, Currency Strategist with DailyFX

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