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Gold Price Outlook: XAU Reversal Targets Consolidation Resistance

Gold Price Outlook: XAU Reversal Targets Consolidation Resistance

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Gold prices have rallied nearly 1.4% since the start of the month with the advance now targeting multi-month consolidation resistance. These are the updated targets and invalidation levels that matter on the XAU/USD charts this week. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

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Gold Daily Price Chart (XAUUSD)

Gold Price Chart - XAU/USD Daily - GLD

Technical Outlook: In my latest Gold Weekly Technical Outlook we cited concerns that, “while our broader outlook is still weighted to the topside, the risk remains for a move lower towards the yearly lows before resumption. From a trading standpoint, we’re looking for a low in price on a test of confluence support near the yearly range lows.” The low registered at 1280 held into the close of the week with price breaking back above the 1302 pivot zone yesterday.

Note that despite the volatility seen over the past few months, price largely remains within the confines of a broad consolidation since the start of the year with a breach above confluence resistance at 1313 needed to validate a larger turn in price targeting the 61.8% retracement at 1321. Daily support rests with the monthly open at 1292 with broader bullish invalidation now set to the highlighted confluence zone around the 100-day moving average at ~1285.

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Gold 120min Price Chart (XAUUSD)

Gold Price Chart - XAU/USD 120minute - GLD

Notes: A closer look at price action shows Gold trading within the confines of a near-term ascending pitchfork formation extending off the March / April lows with the rally attempting to break through confluence resistance at 1307 today in New Yok. A close above down-slope resistance just higher would keep the long-bias in play targeting the March open / 50% retracement at 1313- look for a bigger reaction there IF reached. Initial support rests at 1302 with near-term bullish invalidation at the highlighted trendline confluence around 1300 – weakness beyond this zone would expose the weekly / April open at 1291/92.

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Bottom line: Gold is approaching consolidation resistance and leaves the immediate advance vulnerable heading into 1313 (ultimately a topside breach is favored). From a trading standpoint, a good level to reduce long-exposure / raise protective stops. Look for support on a pullback to offer more favorable entries near slope support with the trade constructive while above1291. Review our latest Gold 2Q forecasts for a longer-term look at the technical picture for XAU/USD prices.

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

Gold Trader Sentiment

Gold Trader Sentiment - XAU/USD Positioning- GLD
  • A summary of IG Client Sentiment shows traders are net-long Gold- the ratio stands at +3.17 (76.0% of traders are long) – bearishreading
  • Long positions are0.2% lower than yesterday and 2.8% higher from last week
  • Short positions are 11.4% higher than yesterday and 7.9% 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.

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

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