Gold Technical Price Forecast: Neutral
Gold prices marked a second consecutive weekly decline on Friday with XAU/USD trading down 1.87% to trade at 1754 ahead of the US close. The sell-off takes price into a key support pivot and we’re looking for possible price inflection off this threshold in the days ahead with the FOMC interest rate decision on tap next week. These are the updated targets and invalidation levels that matter on the XAU/USD weekly technical chart. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this gold technical setup and more.
Gold Price Chart – XAU/USD Weekly
Notes: In my last Gold Weekly PriceOutlook we noted that the XAU/USD had, “rallied more than 9% off yearly low with XAU/USD now attempting to breakout above a key resistance pivot.” The focus was the 61.8% retracement of the May decline & the 52-week moving average which converged on downtrend resistance at 1825/29. Price registered a high at 1834 before reversing sharply lower with the decline now testing a key support zone at the 61.8% Fibonacci retracement of the August rally / 2020 April high & May close high at 1738/47– looking for major price inflection off this threshold.
A break lower would threaten a deeper correction towards the lower parallel (currently ~1715s) and critical support which remains steady at 1670/82. Initial weekly resistance now stands with the pitchfork (near ~1805) backed by 1822/27. Ultimately a breach / close above the yearly high-week close at 1849 is needed to mark resumption of the broader gold uptrend.
Bottom line: Gold has plunged nearly 5% off the Monthly high with the sell-off now probing key weekly support here at 1738/47- looking for a pivot here with the Fed interest rate decision on tap. From at trading standpoint, a good zone to reduce short exposure / lower protective stops – rallies should be capped by the upper parallel IF price is indeed heading lower with a break / close below threatening a deeper pullback towards the yearly lows. Review my latest Gold Price Outlook for a closer look at the near-term XAU/USD technical trade 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
- A summary of IG Client Sentiment shows traders are net-long Gold- the ratio stands at +5.75 (85.19% of traders are long) – typically bearishreading
- Long positions are15.37% higher than yesterday and 17.60% higher from last week
- Short positions are13.80% lower than yesterday and 27.20% 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 further net-long than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger Gold-bearish contrarian trading bias from a sentiment standpoint.
Previous Weekly Technical Charts
– Written by Michael Boutros, Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex