Gold Recovery First Test at Trend Resistance

Gold Technical Price Outlook: XAU/USD Near-term Trade Levels

Gold prices have been range-bound this week after rebounding off critical confluence support and the immediate focus is on this recovery in XAU/USD. Price has carved a well-defined weekly range and we’re looking for the break to offer near-term guidance as we head into the close of February trade. These are the updated targets and invalidation levels that matter on the XAU/USD technical charts heading into the close of the week. Review my latest Strategy Webinar for an in-depth breakdown of this gold technical setup and more.

Gold Price Chart – XAU/USD Daily

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

Technical Outlook: In my last Gold Price Outlook we noted that, “The recent Gold recovery may be vulnerable here into 1876… be on the lookout for possible topside exhaustion ahead of the upper parallel IF price is indeed heading lower.” The slope saw a secondary test in the following days with price registering a higher at 1855 before plummeting more than 5% into critical support at 1763/67 – a region defined by the 50% retracement of the 2020 range, the 61.8% extension of the August decline and the objective November swing lows. Our focus is on the immediate recovery off this mark.

Daily support rests with the low-day close / weekly open at 1784 with a break / close below 1763 still needed to mark resumption of the broader downtrend. Key daily resistance now lowered to the highlighted confluence zone at the 38.2% Fibonacci retracement of the 2021 year-to-date range around 1836 – look for a larger reaction there IF reached with a breach above the February open at 1848 needed to suggest a more significant low is in place.

Gold Price Chart – XAU/USD 120min

Notes: A closer look at Gold price action shows XAU/USD trading within the confines of a descending pitchfork formation extending off the late-January highs. A recovery of more than 3.1% off key support keeps the focus on the weekly opening-range which has taken shape just above the low-day close between 1784 and 1816– look to the breakout for guidance. Watch for topside exhaustion ahead of the upper parallel IF price is heading lower with a break below key support exposing the 100% extension at 1739 and the lower parallels near ~1700.

Bottom line: Last week’s rebound off key support in gold is trading into downtrend resistance and we’re looking for inflection here. From a trading standpoint, a good zone to reduce long-exposure / raise protective stops- Ultimately, the risk remains for a deeper break while within this formation and a break below this threshold could fuel accelerated losses for the yellow metal.Keep in mind we’re heading into the close of the month- not the best time for new intraday positioning. Stay nimble as we head into the March open. 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 +5.20 (83.88% of traders are long) – typically bearishreading
• Long positions are0.79% higher than yesterday and 5.97% lower from last week
• Short positions are 1.28% lower than yesterday and 10.73% 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 more net-long than yesterday but less net-long from last week and 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