Gold Reversal Attempts Breakout of 2022 Downtrend

Gold Technical Price Forecast: XAU/USD Weekly Trade Levels

Gold prices are attempting a breakout of yearly downtrend resistance with XAU/USD already up more nearly 2% this week. The focus in on a weekly close above this key threshold with the yellow metal poised for further gains in the days ahead. These are the updated targets and invalidation levels that matter on the XAU/USD weekly 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

Chart Prepared by Michael Boutros, Technical Strategist; Gold on Tradingview

Notes: In last month’s Gold Weekly Price Outlook I noted that XAU/USD was trading, “just below yearly channel resistance- look to the breakout for short-term direction but with the broader focus on a breakout of the 1631-1722 range for guidance.” An outside weekly reversal off support last week is now threatening a breakout of the yearly downtrend and the focus is on this week’s close. Note that this is the first bullish outside weekly reversal this year – three out of the past four instances saw price follow through in the weeks ahead. While this is not enough evidence to validate a reversal, a close above resistance this week would offer further conviction for a larger recovery in gold.

The immediate focus is on weekly close above confluent resistance here at 1675/76– a region defined by the yearly low-week close and the 2021 swing lows. Although gold closed just above this threshold last week, XAU/USD has been straddling this level for the past few days and I’m looking for some follow through- watch the weekly close. Initial resistance now at the 23.6% Fibonacci retracement of the 2022 range at 1722 with key resistance eyed at the January low-week close / 38.2% retracement at 1788/91– look for a larger reaction there IF reached with a close above to validate a larger trend reversal.

Key support remains steady at the 50% retracement of the 2018 rally / 2020 March reversal close at 1617/31– a break / weekly close below this threshold would be validate resumption of the broader downtrend and puts the double top scenario back in view subsequent support objectives at 1560, 1498, the 2020 low at 1451 and ultimately the double top measure move towards 1300.

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Bottom line: Gold is poised for a possible breakout in the days ahead and the focus is on a weekly close above the 2021 lows. From at trading standpoint, a good place to raise protective stops – look for a reaction on a stretch toward 1791 for guidance. Keep in mind we have US elections and key inflation data (CPI) on tap- stay nimble here. Review my latest Gold Price Short-term Technical Outlook for a closer look at the near-term XAU/USD 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 +3.10 (75.58% of traders are long) – typically bearish reading
• Long positions are 1.76% higher than yesterday and 9.21% lower from last week
• Short positions are 0.30% higher than yesterday and 46.25% 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. Traders are more net-long than yesterday but less net-long from last week. The combination of current positioning and recent changes gives us a further mixed Gold trading bias from a sentiment standpoint.

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– Written by Michael Boutros, Technical Strategist with DailyFX

Follow Michael on Twitter @MBForex