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Gold Technical Outlook: Gold Searches a Low- XAU/USD at Major Levels

Gold Technical Outlook: Gold Searches a Low- XAU/USD at Major Levels

Michael Boutros, Strategist

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

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Gold prices are attempting to mount a counter-offensive today on the heels of a massive sell-off that has seen XAU/USD plunge more than 10% off the yearly highs. It’s the start of ta new month with the FOMC rate decision and US Non-Farm Payrolls still on tap – IF gold doesn’t find a low at these levels, the technical damage could be profound for the longer-term uptrend. 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 the XAU/USD, “reversal takes price back into meaningful technical support and the focus is on possible price inflection down here.” The level in focus was the 2021 high-day close at 1918- and we got a major inflection! An accelerated sell-off plunged more than 7.4% with the decline coming within just cents of confluent support at the 2021 high-week close at 1849- a break below this key level would threaten a washout-towards the 100% extension of the yearly decline / 61.8% Fibonacci retracement of the 2021 advance at 1818/27. Both of these levels represent significant long-term uptrend support and we’re on the lookout for a possible exhaustion low.

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 of a modified descending pitchfork formation extending off the March / April highs with an embedded channel guiding this latest decline. Initial resistance here at 1877 backed by the 61.8% retracement of the yearly range / monthly open at 1891/97- rallies should be capped by this threshold IF price is going to make a run on critical support at 1818/27. Ultimately a breach through the median-line would shift the focus back towards downtrend resistance with subsequent resistance objectives eyed at 1918, 1937/41 with broader bearish invalidation with the 2021 high at 1959.

Bottom line: The gold breakdown is in search of a low. IF this is the low, a close above 1897 should clear the way for a larger recovery. From at trading standpoint, a good region to reduce short-exposure / lower protective stops – we’re looking for evidence of an exhaustion low with either a drop into 1818/27 OR a rally through 1897 needed to offer new entry opportunities. Keep in mind the FOMC interest rate decision is slated for tomorrow with US Non-Farm Payrolls still on tap Friday- expect volatility and stay nimble 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 +4.32 (81.20% of traders are long) – typically bearishreading
  • Long positions are2.89% higher than yesterday and 5.61% lower from last week
  • Short positions are9.35% higher than yesterday and 3.10% 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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- 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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