Gold Price Outlook: XAU/USD Breakout to Intensify as Volatility Surges

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  • Gold price breakout targeting critical resistance- constructive above 1208
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The breakout above yearly down-trend resistance in Gold has fueled a rally of nearly 4% off the monthly lows with the advance failing just ahead of a key resistance range in price. These are the updated targets and invalidation levels that matter on the XAU/USD charts from here. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

Gold Daily Price Chart

Gold Price Outlook: XAU/USD Breakout to Intensify as Volatility Surges

Technical Outlook: In our latest Gold Weekly Technical Outlook our ‘bottom line’ noted that price had, “cleared a technical resistance confluence / the monthly opening-range high and keeps the outlook weighted to the topside… From a trading standpoint, I’ll continue to favor fading weakness while above this week’s open at 1203 targeting the 1235/38 resistance range.” The price breakout in XAU/USD registered a high at 1233 this week before turning lower with gold unable to close above the 100-day moving average for the past four sessions. Key near-term support rests at 1214/15 pivot zone with the outlook weighted to the topside while above the objective monthly opening rangehigh at 1208.

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Gold 240min Price Chart

Gold Price Outlook: XAU/USD Breakout to Intensify as Volatility Surges

Notes: A closer look at price action shows gold continuing to trade within the confines of the ascending pitchfork formation highlighted in last week’s XAU/USD Scalp Report. The advance took out two of our targets before turning with the pullback taking the shape of a possible bull-flag formation. A breach above the resistance confluence around 1227 is needed to fuel a push into the 1235/38 resistance target- expect a more significant reaction there.

A break below 1214 would risk a larger decline with such a scenario targeting former slope resistance (red) around ~1208 and the 25% line / 38.2% retracement at 1205 – both levels of interest for possible exhaustion / long-entries if reached. Ultimately a rally surpassing pitchfork resistance would be needed to mark resumption of the breakout with subsequent topside objectives eyed at the August low at 1251 and the October 2017 low / 50% retracement at 1261/63.

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Bottom line: The immediate focus for gold is on a break of the 1214-1239 price range for guidance – from a trading standpoint, I’ll continue to favor fading weakness in price targeting a breach of this key resistance zone. For now, If you’re not already long, looking for either a drop into 1214/15 OR a breach & re-test of 1238 to offer possible entries.

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: XAU/USD Breakout to Intensify as Volatility Surges

  • A summary of IG Client Sentiment shows traders are net-long Gold – the ratio stands at +4.47(81.7% of traders are long) – bearishreading
  • Long positions are0.5% higher than yesterday and 8.5% lower from last week
  • Short positions are 3.1% higher than yesterday and 54.1% higher from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Spot Gold prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week and the recent changes in sentiment warn that the current Gold price trend may soon reverse higher despite the fact traders remain net-long.

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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