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Gold Price Forecast: XAU/USD A Consolidation or Further Fall?

Gold Price Forecast: XAU/USD A Consolidation or Further Fall?

Mahmoud Alkudsi, Analyst

Gold Price - XAU/USD Technical Outlook

  • Bear pressed Gold to its lowest level this year
  • Will Gold resume bearish price action?

Bears Slow Down

On Friday, Gold declined to its lowest level in over two and half months at $1,504 then closed the weekly candlestick in the red with 8.5% loss. On Monday, the market fell further and broke below $1,500 handle for the first time in 2020. The price rallied after, as some bears seemed to cover.

Alongside that, the Relative Strength Index (RSI) crossed below 50 then remained flat highlighting paused downtrend move.

Gold DAILY PRICE CHART (Jan 15 – Mar 19, 2020) Zoomed out

Gold daily chart price 19-03-20 Zoomed out

Gold DAILY PRICE CHART (Dec 30 – Mar 19, 2020) Zoomed In

Gold daily chart price 19-03-20 Zoomed in

Looking at the daily chart, we notice that last week Gold declined then closed below the 50-day average for the first time in three months. In the following day, the precious metal failed to overtake the 50 DMA generating a significant bearish signal. Later on, the price declined to lower trading zones. Today, the market eyes a test of the low end of current trading zone $1,431 -$1,527.

A close below the low end of the zone may encourage bears to press towards 1,392. Further close below that level could mean more bearishness towards 1,361. Special attention should be paid to the weekly support levels marked on the chart (zoomed in) as some traders might join/exit the market around these points.

In turn, any failure in closing below the low end reflects bears hesitation. This could lead some of them to pull out allowing XAU/USD to surge towards the high end of the zone. Further close above that level may extend this rally towards $1,555. That said, the daily resistance level underscored in on the chart should be watched closely.

Gold Four-HOUR PRICE CHART (Mar 10 – Mar 19, 2020)

gold four hour price chart 19-03-20

From the four-hour chart, we noticed that on March 16 XAU/USD created a low at $1,451 then rallied. Currently, the price faces difficulty in breaking below the aforementioned low and possibly could develop a double bottom pattern. In that scenario, any violation to the neckline located at $1,555 could send the price above $1,640.

A break above $1,532 could cause a rally towards the neckline mentioned above. Yet, the daily resistance level printed on the chart should be considered. On the flip-side, any break below the March 16 low negates the double bottom pattern. Therefore, a break below $1,445 could send XAU/USD towards $1,433. Nevertheless, the weekly resistance level underlined on the chart should be watched closely.

Written By: Mahmoud Alkudsi

Please feel free to contact me on Twitter: @Malkudsi

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.