Gold Price Outlook: Risk Sell-off to Fuel XAU/USD Breakout

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  • Gold prices rebounds off August trendline support- Monthly opening-range breakout pending
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Gold is poised to breakout of a multi-week consolidation range in price. Here are the updated targets and invalidation levels that matter on the XAU/USD charts heading into the close of the week. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

Gold Daily Price Chart

Gold Price Outlook: Risk Sell-off to Fuel XAU/USD Breakout

Technical Outlook: For the past few months our Gold Price Outlook has favored “fading weakness while above 1180” with our most recent update highlighting the threat of a price breakout in XAU/SD heading into October trade. Price registered a low at 1183 this week before rebounding with the monthly opening-range now set just below slope resistance. Key near-term resistance remains at 1214/15- a region defined by the 61.8% retracement of the late-2016 advance, the May 2017 low and the August high. A breach / close above this threshold is needed to validate the breakout of yearly pitchfork resistance with such a scenario targeting the 100-day moving average at 1229 and more significant confluence resistance at 1235/36. Note that daily RSI has topped the 50-level for the first time since the April breakdown and further highlights a shift the momentum profile.

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Gold 240min Price Chart

Gold Price Outlook: Risk Sell-off to Fuel XAU/USD Breakout

Notes: A closer look at price action shows gold trading within the confines of a near-term ascending pitchfork formation extending off August lows. Price is currently testing near-term confluence resistance here at ~1210 with a topside breach targeting the 1214/15 resistance barrier- look for a bigger reaction there. Subsequent topside objectives eyed at the 75% line at ~1223, 1229 and the key resistance range at 1235/38. Interim support rests with the lower 50-line, currently around ~1200, and the monthly open at 1191. Bullish invalidation now raised to pitchfork support at ~1187.

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Bottom line: Gold prices have carved out a clean monthly opening range just below slope resistance. From a trading standpoint, I’ll continue favoring the long-side while above the lower parallel with a breach / close above 1215 needed to fuel the next leg higher in gold prices.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

Gold Trader Sentiment

Gold Price Outlook: Risk Sell-off to Fuel XAU/USD Breakout

  • A summary of IG Client Sentiment shows traders are net-long Gold – the ratio stands at +8.05 (88.9% of traders are long) – bearishreading
  • Long positions are0.8% lower than yesterday and 18.9% higher from last week
  • Short positions are 4.9% higher than yesterday and 33.0% 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. However, traders are less net-long than yesterday but more net-long from last week and the combination of current positioning and recent changes gives us a further mixed Spot Gold trading bias from a sentiment standpoint.

See how shifts in Gold retail positioning are impacting trend- Learn more about sentiment!

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– Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex or contact him at mboutros@dailyfx.com

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