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Gold Price Outlook: XAU/USD Surges 11% as Virus Recession Fears Grow

Gold Price Outlook: XAU/USD Surges 11% as Virus Recession Fears Grow

Michael Boutros, Strategist

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

Gold prices surged more than 11% off the lows with a three-day rally taking XAU/USD into the first major hurdle at downtrend resistance. The immediate advance may be vulnerable here but IF gold has turned the corner, losses should be limited to the weekly open. These are the updated targets and invalidation levels that matter on the XAU/USD technical 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 highlighted the threat of a near-term recovery as XAU/USD marked an outside-day reversal off long-term support at 1431/51.” Price has rallied more than 10% off those levels with the gold recovery testing confluence resistance today at 1607/11- a region defined by the 61.8% retracement of the 2020 yearly range and the January opening-range highs. We’re looking for a reaction off this mark with the immediate advance vulnerable while below. Key daily support rests at 1547/52 with a breach higher from here exposing subsequent resistance objectives at 1649and the yearly high-day close at 1678- look for a bigger reaction there IF reached.

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 a descending pitchfork formation extending off the yearly highs with the upper parallel further highlighting the 1607/11 resistance zone. Initial support rests at 1547/52 – a break there would expose yearly open support at 1520 backed by the weekly open at 1497. Weakness beyond this threshold would be needed to mark resumption of the monthly decline.

Bottom line: The gold price recovery is approaching the first major resistance hurdle here at near-term downtrend resistance and leaves the advance vulnerable sub-1611. From a trading standpoint, a good spot to reduce long-exposure / raise protective stops- be on the lookout for a reaction into this zone with a close above needed to keep the immediate long-bias viable. Ultimately, pullbacks should be limited to weekly open support IF price is indeed heading 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 - GLD Trade Outlook - GC Technical Forecast
  • A summary of IG Client Sentiment shows traders are net-long Gold- the ratio stands at +3.88 (79.52% of traders are long) – bearishreading
  • Long positions are4.25% higher than yesterday and 25.80% higher from last week
  • Short positions are 9.14% lower than yesterday and 28.34% 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 further net-long than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger Gold-bearish contrarian trading bias from a sentiment standpoint.

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Active Trade Setups

- Written by Michael Boutros, Technical 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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