Gold Price Forecast: XAU/USD Range Narrows- GLD Breakout Levels

2019-12-17 16:30:00

Michael Boutros, Strategist

Gold prices recovery at testing multi-month downtrend resistance- bearish invalidation at 1489
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Gold prices are trading just below the December swing highs with the recent recovery off long-term support at risk into the close of the week. These are the updated targets and invalidation levels that matter on the XAU/USD charts. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this gold price setup and more.

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Gold Price Chart - XAU/USD Daily

Chart Prepared by Michael Boutros, Technical Strategist; Gold on Tradingview

Technical Outlook: In my latest Gold Price Outlook we noted constructive outlook in XAU/USD with a, “breach above 1489 needed to validate a breakout of the multi-month downtrend.” Gold registered a high just above 1486 last week before pulling back and leaves the price recovery vulnerable while below the lower parallel. Daily support rests at the highlighted confluence zone where the objective monthly open converges on the November trendline at 1463 with 1451 still critical.

Gold Price Chart - XAU/USD 240min

Notes: A closer look at gold price action shows XAU/USD continuing to trade within the confines of a modified ascending pitchfork formation extending off the November lows with the 75% parallel capping the early-week advance. Initial resistance 1484 with a breach above the 61.8% retracement of the November decline at 1489 needed to suggest a more significant low was registered last month.

Initial support rests with the median-line backed by Friday’s low at 1465 and near-term bullish invalidation at 1458/60–a break below this level would shift the focus back towards key support again at 1451- look for a more significant reaction there IF reached with a close below exposing 1433 and 1420.

Bottom line: The gold recovery is trading just below down-trend resistance and leaves the advance vulnerable sub-1489. From a trading standpoint, look to reduce long-exposure / raise protective stops on a test of the upper parallel – IF price fails, look for a move towards the lower parallel near 1458/60 for guidance. Review my latest Gold Price Weekly Outlook for a closer look at the longer-term XAU/USD technical trading levels.

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

Gold Trader Sentiment – XAU/USD Price Chart

A summary of IG Client Sentiment shows traders are net-long Gold- the ratio stands at +2.34 (70.07% of traders are long) – bearishreading
Long positions are10.38% lower than yesterday and 18.64% lower from last week
Short positions are 13.31% higher than yesterday and 26.72% 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 and recent changes in sentiment warn that the current Gold price trend may soon reverse higher despite the fact traders remain net-long.