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Gold Price Outlook: XAU/USD Breakdown Underway– GLD Trade Levels

Gold Price Outlook: XAU/USD Breakdown Underway– GLD Trade Levels

2020-02-04 16:30:00
Michael Boutros, Strategist
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Gold Technical Price Outlook: XAU/USD Near-term Trade Levels

Gold prices have plummeted more than 2.4% since the start of the month after XAU/USD failed to mount a key resistance barrier we’ve been tracking for weeks now. The risk remains for further losses near-term with the sell-off now approaching initial support targets. 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 trade setup and more.

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Gold Price Chart - XAU/USD Daily

Gold Price Chart - XAU/USD Price Chart - GLD Trade Outlook - GC Technical Forecast

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

Technical Outlook: In my last Gold Price Outlook we noted that the, “The immediate focus is on a break of the 1568-1586 range for guidance with the long-bias still vulnerable while below.” Price attempted to breach the topside into the close of the month (January closed at 1589) but quickly reversed into the February open with sell-off in XAU/USD now probing key near-term support at 1552/57- a region defined by the 61.8% retracement of the mid-January rally and the 2019 high-day close. Note that the median-line also converges on this region – a close below would shift the medium-term focus lower in gold prices.

Gold Price Chart - XAU/USD 120min

Gold Price Chart - XAU/USD 120min - GLD Trade Outlook - GC Technical Forecast

Notes: A closer look at Gold price action sees XAU/USD trading within the confines of a near-term descending pitchfork formation after breaking uptrend resistance yesterday. Price is testing near-term support here at 1557 with subsequent objectives eyed at 1552 and 1546/48- look for a larger reaction there IF reached. Weakness beyond this zone would likely see accelerated losses in gold with such a scenario targeting 1535. Initial resistance stands at 1568 backed by 1575 with broader bearish invalidation steady at 1582/86.

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Bottom line: The immediate threat is lower while below the median-line but look for a reaction into 1546/48 for guidance IF reached. From at trading standpoint, look to reduce short exposure / lower protective stops on a test of parallel support. We’ll be on the lookout for possible downside exhaustion on move into support – that said, respect a close below. Review my latest Gold Weekly Price 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

Gold Trader Sentiment - XAU/USD Price Chart - GLD Trade Outlook - GC Technical Forecast
  • A summary of IG Client Sentiment shows traders are net-long Gold- the ratio stands at +2.38 (70.40% of traders are long) – bearishreading
  • Long positions are0.68% lower than yesterday and 0.62% higher from last week
  • Short positions are 0.57% higher than yesterday and 14.43% 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. 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.
Gold BEARISH
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 12% -10% 8%
Weekly 23% -17% 14%
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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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