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Gold Price Outlook: XAU/USD Fed Rate-Cut Rally at Risk- GLD Levels

Gold Price Outlook: XAU/USD Fed Rate-Cut Rally at Risk- GLD Levels

Michael Boutros, Strategist

Gold Technical Price Outlook: XAU/USD Near-term Trade Levels

Gold prices surged this week as an emergency rate-cut from the Federal Reserve fueled a near-term breakout of more than 3.5%. The rally is now approaching testing uptrend resistance and while the broader outlook remains constructive, the immediate advance may be vulnerable at these levels and a larger pullback may ultimately offer more favorable opportunities closer to trend support. 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.

Gold Price Chart - XAU/USD Daily

Gold Price Chart - XAU/USD Daily - 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 risk remains for a deeper setback while below the high-day closebut be on the lookout for possible downside exhaustion on test of the lower parallel / uptrend support for possible entries.” XAU/USD plummeted more than 7% off the highs with price briefly registering a low at 1562 before rebounding with the recovery once again eyeing resistance at the high-day close / 78.6% retracement at 1658/62 – look for a more significant reaction there IF reached with a close above needed to mark resumption towards the yearly highs at 1689 and he 76.4% retracement at 1713.

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 continuing to trade within the confines of an ascending pitchfork formation with a rebound off the lower parallel now testing median-line resistance ahead of the New York open on Wednesday. Initial support now eyed at 1625 backed by 1611 – bullish invalidation now raised to the 38.2% retracement of the November advance at 1596. Ultimately a breach above confluence resistance cat the high-day close / 1.618% extension at 1658/62 is needed to fuel the next leg higher in price.

Bottom line: Gold prices rebounded off trendline support this week with the advance now testing uptrend resistance- the immediate advance may be vulnerable heading into 1658/62. From a trading standpoint, a good spot to reduce long-exposure / raise protective stops. Be on the lookout for possible topside exhaustion here near-term. Ultimately, a pullback may offer more favorable entries with a topside breach needed to fuel the next leg higher. 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
  • A summary of IG Client Sentiment shows traders are net-long Gold- the ratio stands at +2.21 (68.88% of traders are long) – bearishreading
  • Long positions are10.36% lower than yesterday and 10.62% higher from lastweek
  • Short positions are 23.13% higher than yesterday and 10.19%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 & compared with last week and the recent changes in sentiment warn that the current Gold price trend may soon reverse higher despite the fact traders remain net-long.

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Active Trade Setups

- 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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