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Gold prices have surged nearly 13% off the yearly lows with the advance probing fresh six-year highs today in New York. The breakout is testing initial resistance targets today at the late-2013 swing highs with daily momentum deep in overbought territory. While the broader outlook remains constructive, the advance may be vulnerable near-term while below today’s highs. 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 Gold setup and more.

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

Gold Price Chart - XAU/USD Daily

Gold Price Chart - XAU/USD Daily - GLD Technical Outlook

Technical Outlook: In my latest Gold Price Weekly Outlook we noted that a weekly close above 1392 was needed to keep the immediate long-bias viable targeting, “subsequent topside objectives at 1433 and the 100% extension of the late-2015 advance at 1451- look for a bigger reaction there IF reached.” Price registered a high at 1439 today before puling back into the 1433 zone early in US trade.

While the broader outlook remains constructive, a daily close below this threshold would leave the immediate advance vulnerable. No significant support emerges until 1391 with broader bullish invalidation at 1366. A topside breach from here keeps the focus on the 100% extension of the late-2015 advance at 1451 (critical) backed by the 50% retracement of the 2011 decline at 1482.

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

Bottom line: The immediate Gold price advance is vulnerable while below the 1433. From a trading standpoint, a good spot to reduce long-exposure / raise protective stops. Be on the lookout for possible near-term exhaustion IF price fails to close above today. Ultimately a larger pullback may offer more favorable long-entries while above former slope resistance / 1391. 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 Price Chart
  • A summary of IG Client Sentiment shows traders are net-long Gold- the ratio stands at +1.46 (59.3% of traders are long) – weak bearishreading
  • Long positions are3.2% higher than yesterday and 21.8% higher from last week
  • Short positions are11.3% higher than yesterday and 9.0% 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 but more net-long from last week and the combination of current positioning and recent changes gives us a further mixed 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