Gold Price Trading at a Critical Level of Support; XAU Hold or Fold?
Gold Price Technical Outlook
- Gold is currently trading around an important level created in 2020
- Price support is also in alignment with two trend-lines
- Watching price action closely for gauging the general trading bias
Gold Price Trading at a Critical Level of Support; Hold or Fold?
Gold has been weak for months, and if the big level it is sitting on can’t provide a floor the slide could extend with increased momentum. The meat of the level in question dates to the time surrounding the initial coronavirus chaos.
From February to June of last year the 1680 area was in play on five occasions as support and resistance. The final test led to the run to the record high at 2075. Now that we have come full circle from that run and hit a big level, it will be interesting to see if the longer-term uptrend can now stay intact.
So far, this week we have seen support hold. The level from 2020 is also in confluence with the trend-line from May 2019 and lower-side trend-line of a would-be bull-flag. It isn’t a pattern, though, until it confirms by breaking the top-side trend-line. For the integrity of the long-term pattern to remain intact a rally will need to commence. Soon.
A daily close below 1670 may do the trick for causing a larger slide. As far as support from that point, there isn’t anything meaningful to speak of at this time until a good way lower to the March 2020 low at 1451.
From a tactical standpoint, the current spot may provide an attractive risk/reward opportunity for longer-term players looking to establish a long position. Even for intermediate-term traders, a rally back to the top of the bull-flag would be a sizable advance from here relative to the distance gold needs to travel to break support.
As for shorts, existing shorts may want to tighten up, however; if support breaks then the downside could gain meaningful momentum that extends both existing shorts and provides fresh momentum opportunities for those sitting flat.
Gold Daily Chart (sitting on big support)
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.