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Gold Price Technical Outlook: Gold Rally at Risk– War Bid Driver

Gold Price Technical Outlook: Gold Rally at Risk– War Bid Driver

Michael Boutros, Strategist

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

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Gold prices are virtually unchanged for the week despite a range of nearly 2%. XAU/USD has surged more than 5.5% off the January low with price reversing sharply off uptrend resistance at the November highs yesterday. While the broader outlook remains constructive, the immediate rally may be vulnerable to exhaustion here and a pullback may offer more favorable opportunities in the day ahead as the threat of war in Europe intensifies. 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.

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 Prices Outlook we noted that the XAU/USD rally was approaching confluent resistance near 1830 – our focus was on a reaction off this zone with a topside breach exposing, “the 2021 trendline (red, currently ~1840s) backed by key resistance at the 2021 high-week close / 78.6% retracement at 1849/50- a daily close above this threshold is needed to suggest a larger breakout is underway with such a scenario eyeing the November highs / 100% ext of the August advance at 1877.” Gold ripped through resistance three days later with price registered a high yesterday at 1879 before reversing sharply to mark an outside-day reversal off uptrend resistance. So is a near-term high in place?

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 continuing to trade within the confines of the ascending median-line formation we’ve been tracking off the November / December lows. A false break scenario may be in play here after yesterday’s failed attempt to breach uptrend resistance with gold trading back into the weekly open on Wednesday morning in US trade.

Initial support rests at the 2021 high-week close at 1849 backed closely by the 38.2% Fibonacci retracement of the late-January advance (essentially the year-to-date range) at 1841- weakness beyond this threshold would threaten a larger correction towards with subsequent support objectives at the July high-day close (1829) and the 61.8% retracement at 1818. Broader bullish invalidation now raised to the 61.8% retracement of the December advance at 1801. Look for initial resistance along the upper parallel (currently near ~1867) with a close above 1877 still needed to fuel the next leg higher in price towards the 2021 yearly open at 1899.

Bottom line: The gold breakout has responded to uptrend resistance and the immediate advance may be vulnerable while below the weekly high. From a trading standpoint, a good region to reduce portions of long-exposure / raise protective stops – look for a reaction into 1841 for guidance IF reached. Ultimately a largely pullback may offer more favorable opportunities closer to uptrend support with a breach above 1877 needed to mark resumption of the broader uptrend. Keep in mind a breach of the highs would likely fuel another accelerated rally- stay tuned! 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 +2.15 (68.26% of traders are long) – typically bearishreading
  • Long positions are9.57% higher than yesterday and 3.97% lower from last week
  • Short positions are2.48% lower than yesterday and 7.09% 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. Trader are more net-long than yesterday but less 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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