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Gold Price Outlook: XAU Breakout - Too Far, Too Fast?

Gold Price Outlook: XAU Breakout - Too Far, Too Fast?

2019-06-04 16:00:00
Michael Boutros, Strategist
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Gold prices have surged more than 4.5% off the May lows with the breakout now testing the first major test of resistance. These are the updated targets and invalidation levels that matter on the XAU/USD charts. 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 (XAUUSD)

Gold Price Chart - XAU/USD Daily - GLD Outlook

Technical Outlook: In my latest Gold Price Weekly Outlook we noted that the breakout remained, “constructive while above 1275/76 heading into the open of June trade with a weekly close above 1302 needed to fuel the next leg higher in price.” A topside breach / close on Friday validates a breakout of the May opening-range with the advance now testing confluence resistance at 1328/29 – a region defined by the 2019 high-week close and the 78.6% retracement of the year range.

Why does the average trader lose? Avoid these Mistakes in your trading

Gold 240min Price Chart (XAUUSD)

Gold Price Chart - XAU/USD 240min - GLD Outlook

Notes: A closer look at price action shows Gold trading within the confines of an ascending pitchfork formation extending off the May lows with the upper parallel further highlighting the 1328/29 resistance zone. The immediate advance may be vulnerable below this level, but the trade remains constructive while above the weekly open at 1305. Look for initial support around the 61.8% retracement at 1315. A topside breach of this resistance barrier would keep the focus on subsequent objectives at the yearly high-day close at 1337 and the high-close at 1341 – look for a bigger reaction there If reached.

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Bottom line: The Gold price breakout is testing the first major resistance zone and leaves the immediate advance vulnerable while below 1329. From at trading standpoint, a good place to reduce long-exposure / raise protective stops. Risk for possible price exhaustion here but ultimately, we’ll be looking for better long-entries on a pullback. A break / close below 1302 would be needed to put the bears back in control. 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 Sentiment - GLD Price Chart
  • A summary of IG Client Sentiment shows traders are net-long Gold- the ratio stands at +1.67 (62.6% of traders are long) – bearishreading
  • The percentage of traders net-long is now its lowest since February 4th
  • Long positions are7.9% lower than yesterday and 22.3% lower from last week
  • Short positions are32.3% higher than yesterday and 60.4% 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.

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