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Gold Price Forecast: XAU/USD Looks Primed to Extend Monthly Losses

Gold Technical Forecast: Bearish

  • Gold prices likely to head lower despite recent gains
  • XAU/USD is trading within a broad Descending Channel
  • Downside likely once 61.8% Fibonacci level gives way

Gold looks primed to drop in the coming week when looking at its technical posture. XAU/USD recorded a second weekly gain, extending the yellow metal’s winning streak. However, momentum appears to be fading, and prices remain lower on the month. Moreover, a surge in the US Dollar DXY index is certainly providing no favors to the outlook.

XAU/USD’s intraday drop earlier this month pinged a downward channel’s lower bound. Prices subsequently rallied. Upside energy faded shortly below the psychologically imposing 1800 level, however. The falling 50-day Simple Moving Average (SMA) — oriented below channel resistance — provided confluent pressure.

Speaking of moving averages, a bearish Death Cross formation sent an ominous signal to technical traders earlier this month. That said, an upside move will likely face prompt resistance from the aforementioned levels. Given the broader move lower, surmounting those barriers is unlikely after failing to break higher recently.

The MACD and Relative Strength Index (RSI) oscillators are tracking higher, although RSI remains below its 50 neutral point. Immediate support appears to be at the 61.8% Fibonacci retracement level from the July/August move. A break lower may give way to further weakness within the broader channel. The 38.2% Fib may provide the next level of support. All things considered, gold’s path of least resistance looks skewed to the downside.

Gold Daily Chart

XAU Price Chart, Gold

Chart created with TradingView

Gold TRADING RESOURCES

— Written by Thomas Westwater, Analyst for DailyFX.com

To contact Thomas, use the comments section below or @FxWestwater on Twitter