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Gold Price Outlook: XAU Defends Yearly Lows– Breakout Levels Defined

Gold Price Outlook: XAU Defends Yearly Lows– Breakout Levels Defined

Michael Boutros,
What's on this page

Gold prices are poised to close higher on the week after yet another failed attempt to break below long-term technical support. These are the updated targets and invalidation levels that matter on the XAU/USD charts heading into next 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

Technical Outlook: In my latest Gold Price Weekly Outlook we noted that the, “immediate focus is on the weekly close in relation to the 1275/76 zone.” – a region defined by the yearly opening-range low, the 38.2% retracement of the 2018 advance and the August trendline. XAU/USD briefly tested the yearly low-day close at 1270 before reversing sharply with the advance taking price back into the May open at 1283. Gold is poised to close above this long-term support zone for a sixth consecutive week and keeps the broader short-bias vulnerable while above- focus remains on a break of the monthly opening-range.

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Gold 120min Price Chart (XAUUSD)

Gold Price Chart - XAUUSD 120minute

Notes: A closer look at price action shows Gold trading within the confines of an embedded ascending channel formation off the weekly lows. Initial support rests with at 1280 with near-term bullish invalidation now raised to the weekly open at 1277.

Topside resistance objectives are eyed at the highlighted trendline confluence around ~1288 and the 61.8% retracement of the monthly decline at 1290 – look for a reaction there. Ultimately a breach / close above the upper parallel / May high-day close at 1296 would be needed to validate a larger reversal in price targeting 1302.

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Bottom line: Gold prices have responded to multi-month slope support – the focus remains on a break of the recent consolidation range for broader guidance. From a trading standpoint, the immediate threat is for a larger rebound while above 1277 but look for possible near-term exhaustion near 1290 for a pullback. Ultimately a breach above 1296 is needed to suggest a more significant low may be in place. Weakness below the yearly low-day close at 1270 would mark resumption and shift the focus back towards the 100% extension at 1258.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 Price Chart
  • A summary of IG Client Sentiment shows traders are net-long Gold- the ratio stands at +3.71 (78.8% of traders are long) – bearishreading
  • Long positions are9.5% lower than yesterday and 1.2% higher from last week
  • Short positions are1.3% higher than yesterday and 4.7% 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 less net-long than yesterday but more 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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- 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.