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Gold Price Outlook: Gold Plunge Searches for Support- XAU/USD Levels

Gold Price Outlook: Gold Plunge Searches for Support- XAU/USD Levels

Michael Boutros, Strategist

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

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Gold prices are contracting just above the monthly lows after last week’s 2.19% reversal off key technical resistance. While the broader outlook is constructive, the threat for a deeper pullback remains while within this near-term formation and we’re on the lookout for an exhaustion low in the days ahead. 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 last week’s Gold Price Outlook we noted that, “the risk remains for a pullback while below 1825/29 – look for downside exhaustion ahead of 1768 in the event of a correction with a breach / close higher needed to fuel the next leg higher in price.” XAU/USD briefly registered an intraday high at 1834 the following day before reversing sharply back below the 2012 highs at 1795- is a near-term high in place?

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 trading within the confines of a descending pitchfork formation – weekly-open support rests at 1787 backed by the 38.2% Fibonacci retracement of the August advance at 1774- look for a larger reaction there for guidance IF reached with a break risking a plunge towards the June low / 100% extension at 1750/52. Initial resistance stands with the upper parallel (currently ~1805) with a near-term bearish invalidation now at the monthly open / 61.8% retracement at 1813/14.

Bottom line: Gold collapsed off confluent trend resistance a multi-month highs last week. From a trading standpoint, the threat remains for a deeper pullback while below 1814 but we’re on the lookout for an exhaustion low in the days ahead- look for a reaction into the lower parallels / 1774 IF reached for guidance. Ultimately a breach / close above 1825/29 is still needed to fuel the next leg higher in price. Stay nimble this week with key inflation data from the US, UK, Canada and the Eurozone likely to fuel some volatility here. 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 Outlook
  • A summary of IG Client Sentiment shows traders are net-long Gold- the ratio stands at +3.87 (79.47% of traders are long) – typically bearishreading
  • Long positions are1.57% higher than yesterday and 6.21% higher from last week
  • Short positions are10.72% higher than yesterday and 16.71% 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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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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