Gold Price Forecast: XAU/USD – Eyes on Key Neckline Support
XAU/USD Technical Analysis
- Markets adjusted between fears of Covid-19 and hopes for a vaccine
- XAU/USD price chart exposes a reversal pattern
Gold Price – Bulls Eased Up
Last week, Gold hit a one week high of $1,814 then retreated after. However, the price closed the weekly candlestick modestly in the green with a 0.6% gain. Alongside that, the Relative Strength Index (RSI) abandoned the overbought territory reflecting a weaker bullish momentum.
The market invested in riskier assets amid positive news about a coronavirus vaccine. Meanwhile, the US-China tensions combined with the accelerating trend of Covid-19 infections in the US and elsewhere kept the demand on safe havens intact.
Gold DAILY PRICE CHART (Jan 1, 2019 – July 20, 2020) Zoomed out
Gold DAILY PRICE CHART (March 6 – July 20, 2020) Zoomed In
On July 8, Gold climbed to the current trading zone $1,796- $1,859, and since then the price has failed on multiple occasions to break through the lower trading zone, repeatedly rebuffing efforts to put bears back in charge.
Another close above the high end of the current zone $1,796 may open up a push behind Gold towards the high end of the zone $1,859 - the Fibonacci 161% extension. A further close above that could encourage bulls to extend the rally towards 1,920- a monthly resistance level.
On the flip-side, a close below the low end of the zone may ultimately guide XAU/USD’s fall towards the monthly support level at $1,752, and any further close below that level may encourage bears to send the price even lower towards the following monthly support at $1,685.
Gold Four-HOUR PRICE CHART (JuLy 3 – July 20, 2020)
On July 9, XAU/USD paused its bullish move and traded in a Double Top pattern where the neckline resided at $1,790. Hence, a break below this level would generate a bearish signal, while any break above the downside trendline resistance originating from the July 8 high at$1,818 may keep the bullish potential alive.
To conclude, a break above the July 8 high $1,818 may trigger a rally towards $1,830, while any break below the aforementioned neckline at $1,790 could send Gold towards $1,772. As such, the daily resistance and support levels underscored on the four-hour chart should be kept in focus.
Written By: Mahmoud Alkudsi, Market Analyst
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.