Gold pricescollapsed more than 3.8% this week with XAU/USD on pace for the largest weekly decline since June 2020. The plunge marks the fourth consecutive weekly sell-off and takes price into critical support of a multi-year uptrend extending off the 2018 lows. This is the last line of defense for the bulls and we’re on the lookout for possible price inflection into this key technical zone. These are the updated targets and invalidation levels that matter on the XAU/USD weekly technical price chart.
Gold Price Chart – XAU/USD Weekly
Notes: In last month’s Gold Weekly PriceOutlook we noted that XAU/USD was, “is threatening a break below key technical support and the focus is on the monthly / weekly close with respect to 1818/28 for guidance.” A close below materialized with Gold taking another leg lower this week to test critical confluent support at the 2018 / 2019 trendline / 2021 low-week close at 1729– looking for a major reaction off this mark.
Initial weekly resistance eyed at the January low-week close (1791) backed again by the 100% extension of the yearly decline / 61.8% Fibonacci retracement of the 2021 rally at 1818/28. Ultimately, a breach /close above 1861 would be needed to invalidate the March (medium-term) downtrend. A break / close below this pivotal support zone (1729) would likely fuel another accelerated sell-off in gold with such a scenario exposing the 2021 lows around 1670/80.
Bottom line: Gold is now testing a pivotal level at multi-year trendline support, the last line of defense for the 2018 uptrend- looking for inflection down here. From at trading standpoint, a good zone to reduce short-exposure / lower protective stops – be on the lookout for possible downside exhaustion into this technical confluence with a close above 1791 needed to alleviate immediate downside pressure. Review my latest Gold Price Outlook for a closer look at the near-term XAU/USD technical trade levels.
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Gold Trader Sentiment – XAU/USD Price Chart
- A summary of IG Client Sentiment shows traders are net-long Gold- the ratio stands at +6.59 (86.83% of traders are long) – typically bearishreading
- Long positions are2.98% higher than yesterday and 1.88% higher from last week
- Short positions are 8.09% lower than yesterday and 6.35% 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.
Active Weekly Technical Charts
– Written by Michael Boutros, Technical Strategist with DailyFX
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