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Gold Price Forecast: XAU/USD Plummets, Are the Bulls Done For?

Gold Technical Price Outlook: XAU/USD Weekly Trade Levels

Gold prices plummeted nearly 11% off the record / yearly highs with XAU/USD breaking out of a multi-month consolidation pattern. The threat remains for a deeper correction near-term before resumption of the broader uptrend in price. These are the updated targets and invalidation levels that matter on the gold weekly charts. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this gold technical setup and more.

Gold Price Chart – XAU/USD Weekly

Gold Price Chart

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

Notes: In last month’s Gold Weekly PriceOutlook we noted that XAU/USD was, “in consolidation just above confluence support and we’re looking for a breakout to offer guidance. From a trading standpoint, the risk remains for a deeper correction while below 1994.” Gold resolved lower this week with a break of the contraction zone giving way to a decline of more than 4.6%.

Initial weekly support eyed at the 38.2% Fibonacci retracement of the 2020 yearly range at 1836 backed by the 2012 high / 100% extension at 1795-1803. Ultimately, the broader outlook remains constructive while above the highlighted confluence zone around ~1763.Resistance now stands back the 2011 high-close at 1909 with bearish invalidation now lowered to the August weekly reversal-close at 1932– a breach / close above this threshold would be needed to shift the near-term focus higher again.

Bottom line: Gold prices have broken lower and while the broader technical structure is constructive, the risk remains for a deeper correction before resumption. From a trading standpoint, look for topside exhaustion on recoveries ahead of 1932 IF price is indeed heading lower – ultimately, a larger correction may offer more favorable entries closer to longer-term uptrend support. Review my latest Gold Price Outlook for a closer look at the near-term XAU/USD technical trading 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

Gold trader sentiment

  • A summary of IG Client Sentiment shows traders are net-long Gold- the ratio stands at +4.28 (81.05% of traders are long) – bearishreading
  • Long positions are3.87% higher than yesterday and 4.54% higher from last week
  • Short positions are13.06% lower than yesterday and 6.16% 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.

Change in Longs Shorts OI
Daily1%-4%0%
Weekly9%-10%5%

Previous Weekly Technical Charts

– Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex