- Gol d prices testing fresh yearly lows- immediate focus is on consolidation above 1204
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Gold is down nearly 7% year-to-date with price registering fresh yearly lows last week. Both price and momentum have been coiling up and the focus is on a breakout in the days ahead of guidance. Here are the updated targets and invalidation levels that matter for Gold. Review this week's Strategy Webinar for an in-depth breakdown of this setup and more.
Gold Daily Price Chart
Technical Outlook: In last week's Gold price forecast we highlighted that the, " threat of a near-term recovery remains evident while above the lower 50-line / 201 7 March low-week close at ~ 1204 ." Price registered a fresh yearly low at 1204 before rebounding with the weekly o pening range taking shape just above this key threshold.
Interim resistance stands at 1215 backed by the monthly open at 1223 . Broader bearish invalidation stands at 1236 - a breach / close above this threshold would be needed to suggest a more significant low is in place. A break lower from here risks substantial losses for the yellow metal with such a scenario targeting the lower parallel (currently ~ 1190 s), 1180 and the 78.6% retracement at 1175 .
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Gold 240min Price Chart
Notes: A closer look at price action sees gold trading just below the median-line of the broad descending pitchfork formation we've been tracking off the February / April highs. A breach above this slope would help alleviate further downside pressure. Note that intraday RSI has not broken above 60 since early July- look for a change in behavior. A break lower eyes initial support objectives at 1194 backed by 1175/80 .
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Bottom line: IF gold prices are going to rebound, this is a good spot to look. The broader short-bias remains vulnerable near-term while above 1204 - look for a break of the weekly opening range for guidance with a breach 1215 targeting the December lows / upper parallel at 1236 . From a trading standpoint, I'm looking for signs of exhaustion down here - I'll favor fading weakness into 1204 / buying a break & retest of slope resistance as support. That said, respect a downside break - this is a pretty big pivot in price for Gold. Stay nimble here- with all the Trade War headlines circulating and trader sentiment pulling back from recent extremes, this contracting rang e in gold is likely to give way to a larger leg in the days ahead.
For a complete breakdown of Michael's trading strategy, review his Foundations of Technical Analysis series on B uilding a T rading S trategy
Gold Trader Sentiment
- A summary of IG Client Sentiment shows traders are net-long Spot Gold - the ratio stands at +6.02 (85.8% of traders are long) - bearish reading
- Long positions are 1.5% higher than yesterday and 2.3% lower from last week
- Short positions are 7.2% higher than yesterday and 10.9% higher from last week
- We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Spot Gold prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current Gold price trend may soon reverse higher despite the fact traders remain net-long .
See how shifts in Gold retail positioning are impacting trend- Le arn more about sentiment!
Economic Calendar - l atest e conomic d evelopments and u pcoming event ri sk
Other Setups in Play
- AUD/USD Price Analysis: Aussie Consolidation in Focus ahead of RBA
- GBP/AUD Technical Outlook: Price Testing Major Trend Support
- XAU/USD Price Analysis: Gold Bounces from Fibonacci Support
- EUR/USD Price Analysis: Euro Poised to Break with ECB / US GDP on Tap
- Written by Michael Boutros , Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex or contact him at firstname.lastname@example.org
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
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