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Gold Price Forecast: Gold in Free-fall – XAU/USD Breakdown Levels

Gold Price Forecast: Gold in Free-fall – XAU/USD Breakdown Levels

Michael Boutros, Strategist

Gold Technical Price Outlook: XAU/USD Weekly Trade Levels

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Gold prices are poised for a third consecutive weekly decline with XAU/USD plummeting more than 9.7% off the November highs to trade at 1782 in early New York trade on Friday. A break below major technical support zones this week highlights the threat for further losses in the days ahead as bullion plunges to fresh four-month lows. These are the updated targets and invalidation levels that matter on the gold weekly charts heading into the close of the week. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this gold technical setup and more.

Gold Price Chart - XAU/USD Weekly

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

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

Notes: In last month’s Gold Weekly PriceOutlook we noted that the sell-off was approaching a key technical support confluence at “the 38.2% Fibonacci retracement of the yearly range at 1836 backed by and the 2012 high / 100% extension at 1795-1803 (critical) – look for a larger reaction there IF reached.” An early-week sell-off boke below the November opening-range and fueled a decline of nearly 5% with XAU/USD attempting to mark a weekly close below this key support zone today.

A close at these levels would leave the risk lower heading into next week with subsequent support objectives eyed at former trendline resistance (blue- currently ~1765s) and the 100% extension at 1739- area of interest for a possible low / downside exhaustion IF reached. Weekly resistance now stands back at 1803 with bearish invalidation lowered to 1836.

Bottom line: The Gold price sell-off has broken below key technical barriers and leaves the outlook for XAU/USD weighted to the downside heading into the close of the month. From a trading standpoint, look to reduce short-exposure / lower protective stops on a test of 1739 – recoveries should be capped by 1836 IF price is indeed heading lower. Ultimately, a larger correction here may offer more favorable entries closer to uptrend support with a breach / close above 1909 needed to mark resumption of the broader uptrend. Review my latest Gold Price Outlook for a closer look at the near-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 +5.67 (85.01% of traders are long) – bearishreading
  • Long positions are1.15% higher than yesterday and 8.96% higher from last week
  • Short positions are2.14% higher than yesterday and 1.50% 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. The combination of current positioning and recent changes gives us a further mixed Gold trading bias from a sentiment standpoint.

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Previous Weekly Technical Charts

- 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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