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Gold Price Outlook: Gold Rally Runs into First Test of Resistance

Gold Price Outlook: Gold Rally Runs into First Test of Resistance

Michael Boutros, Strategist

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

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Gold prices rallied more than 2.3% this week XAU/USD marking a third consecutive weekly advance. A reversal off technical downtrend support is now approaching the first major test of downtrend resistance – we’re on the lookout for price inflection in the days ahead with the immediate rally vulnerable into these upcoming levels. These are the updated targets and invalidation levels that matter on the XAU/USD technical charts heading into the close of the week. Review my latest Strategy Webinar for an in-depth breakdown of this gold technical setup and more.

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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 XAU/USD had responded to key support and to look for, “a stretch into confluence resistance near 1884/88 – look for a reaction / pivot there with a breach / close above needed to suggest a more significant low is in place.” Gold is up more than 2.3% this week with the rally testing this key threshold in early New York trade on Friday -watch the close for guidance with the immediate rally vulnerable near-term while below.

Daily support rests with the 25% parallel (currently ~1827) backed by 1790/1803 – both zones of interest for possible downside exhaustion IF price is indeed heading higher. A topside breach from here exposes subsequent daily resistance objectives at the 50% retracement / 2011 high / 100% extension at 1920/30and the 61.8% retracement of the August decline at 1956a breach / close above this threshold would be needed to mark resumption of the broader uptrend.

Gold Price Chart - XAU/USD 240min

Gold Price Chart - XAU/USD 240min - GLD Trade Outlook - GC Technical Forecast

Notes: A closer look at Gold price action shows XAU/USD trading within the confines an embedded ascending channel extending off the late-November lows with the recent rally now pressing Fibonacci resistance at the 1888. Weekly open support rest at 1840 with a break below this week’s lows risking a larger setback in price. Ultimately the trade remains constructive while within the broader pitchfork formation (blue) extending off the yearly low.

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Bottom line: The gold price recovery is testing the first major resistance level into 1888 at uptrend resistance- looking for inflection off this zone. From at trading standpoint, a good region to reduce long-exposure / raise protective stops – the rally remains constructive near-term while above the weekly open but the advance may be vulnerable closer to slope resistance. We’ll be on the lookout for a more prominent reaction on a stretch into 1920/30 for guidance IF reached. 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 +3.30 (76.74% of traders are long) – typically bearishreading
  • Long positions are0.19% lower than yesterday and 6.66% lower from last week
  • Short positions are 11.56% higher than yesterday and 10.34% higher 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 and compared with last week. Recent changes in sentiment warn that the current Gold price trend may soon reverse higher despite the fact traders remain net-long.
Gold MIXED
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -3% -18% -5%
Weekly -12% 3% -10%
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Active Technical 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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