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Gold Technical Price Outlook: XAU/USD Short-term Trade Levels
Gold prices rallied more than 0.6% since the start of the week with XAU/USD rebounding off downtrend support into the close of the month. The rally keeps price within the confines of a multi-month downtrend and the focus heading into the October / Q4 open is on a possible test of downtrend resistance for guidance. These are the updated targets and invalidation levels that matter on the XAU/USD short-term technical charts. Review my latest Strategy Webinar for an in-depth breakdown of this gold technical setup and more.
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Gold Price Chart – XAU/USD Daily
Chart Prepared by Michael Boutros, Technical Strategist; Gold on Tradingview
Technical Outlook: In last month’s Gold Short-term Price Outlook we warned that XAU/USD had turned from downtrend resistance and that, “losses sub-1729 would be technical damaging and could fuel another accelerated decline. . .” Price broke support into the close of August with gold plunging another 6.4% to fresh yearly lows – the decline turned just ahead of the January 2020 high at 1611 (low registered at 1614) this week. Looking for possible topside exhaustion on this recovery heading into October.
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Gold Price Chart – XAU/USD 240min
Notes: A closer look at Gold price action shows XAU/USD continuing to trade within the confines of the descending pitchfork formation we’ve been tracking off the yearly highs. A rebound off the median-line has broken through the weekly opening-range highs, threatening a possible test of the downtrend.
Initial resistance eyed at the May June 2020 lows at 1671 backed closely by the Fibonacci confluence around 1682/88– rallies should be capped by this threshold IF price is indeed heading lower on this stretch. Broader bearish invalidation now lowered to the August low-day close / 61.8% retracement at 1729/34. Weekly open support rests at 1643 backed by 1611 – a break / close below this threshold is needed to mark resumption of the broader downtrend with subsequent objectives eyed at the 78.6% retracement of the 2020 advance at 1585 and the 50% retracement of the 2015 advance at 1560.
Bottom line: Gold is rebounding off downtrend support into the close of the month and threatens a larger recovery / test of slope resistance in the days ahead. From a trading standpoint, be on the lookout for possible topside exhaustion / price inflection on a stretch towards the upper parallel (~1700) IF reached – ultimately a break / close back below 1611 is needed to mark resumption of the broader downtrend. Stay nimble heading into the monthly open with US non-farm payrolls on tap next Friday. Review my latest Gold Weekly Price Outlook for a closer look at the longer-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
- A summary of IG Client Sentiment shows traders are net-long Gold- the ratio stands at +3.94 (79.74% of traders are long) – typically bearish reading
- Long positions are 0.94% lower than yesterday and 12.71% lower from last week
- Short positions are 7.18% higher than yesterday and 12.21% 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. Yet traders are less net-long than yesterday and compared with last week. From a sentiment standpoint, the recent changes in positioning warn that the current Gold price trend may soon reverse higher despite the fact traders remain net-long.
| Change in | Longs | Shorts | OI |
| Daily | -1% | 4% | 0% |
| Weekly | -10% | 8% | -7% |
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– Written by Michael Boutros, Technical Strategist with DailyFX
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