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Gold Price Outlook: Gold Rallies as Rates Tank- XAU/USD Levels

Gold Price Outlook: Gold Rallies as Rates Tank- XAU/USD Levels

Michael Boutros, Strategist

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

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Gold prices rallied more than 3.7% off the June lows with XAU/USD building on a broader recovery off key technical support. The advance is now probing initial resistance hurdles and while the immediate recovery may be vulnerable, the technical stance suggests the larger correction may yet have further upside potential. These are the updated targets and invalidation levels that matter on the XAU/USD technical charts. Review my latest Strategy Webinar for an in-depth breakdown of this gold technical 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 noted that XAU/USD had, “plunged into a critical uptrend support and the focus is on a reaction off this threshold. From at trading standpoint, a good zone to reduce short-exposure /lower protective stops.” The support zone in focus was 1764-69- a region defined by the 50% retracement of the 2020 advance, the 61.8% Fibonacci extension of the 2020 decline and the 61.8% retracement off the March rally. Gold briefly registered an intraday low at 1750 into the close of June before rebounding with a six-day consecutive rally testing resistance this week at the 38.2% retracement of the June decline at 1814.

The decline off the June highs looks to have completed a five-wave pattern and suggests a corrective stance on this gold recovery may be appropriate. With that in mind, key daily support now expands to 1764/76- a region which now includes the monthly open, the 61.8% retracement of the most recent advance and the sliding parallel extending off the yearly low. A topside breach above this resistance zone would satisfy a corrective bounce and may offer a fade-able event from more favorable levels. Ultimately a breach / close above 1853 would be needed to mark resumption of the broader uptrend.

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 shows XAU/USD breaching near-term downtrend resistance last week with the breakout trading within a newly identified ascending pitchfork formation off the lows. Price turned just ahead of the upper parallel today on building divergence with the pullback now testing initial support at the median-line / 2012 high at 1795- look for near-term inflection here with a break risking a larger setback towards the weekly opening-range low at 1784 and 1776- both zones of interest for possible downside exhaustion IF reached. A close above 1814 would expose the upper parallel / 50% retracement at 1833.

Bottom line: Gold’s recovery off critical uptrend support is now probing initial resistance hurdles. From a trading standpoint, look for downside exhaustion ahead of 1776 IF the correction interpretation is correct with a breach of the highs shifting the focus towards the upper parallels. 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 Retail Positioning - GC Technical Forecast
  • A summary of IG Client Sentiment shows traders are net-long Gold- the ratio stands at +5.41 (84.39% of traders are long) – typically bearishreading
  • Long positions are4.48% lower than yesterday and 4.44% lower from last week
  • Short positions are2.89% higher than yesterday and 3.56% 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.

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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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