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Home Technical Analysis

Gold Stages December Rally- Is a Low In Place?

Forex Tips by Forex Tips
December 8, 2020
in Technical Analysis
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Gold Technical Price Outlook: XAU/USD Near-term Trade Levels

Gold prices have rallied more than 1.8% since the start of the week with XAU/USD building on last week’s reversal off technical support. The advance is now facing its first test of downtrend resistance and we’re looking for a reaction just higher for guidance. These are the updated targets and invalidation levels that matter on the XAU/USD technical charts heading into the close of a volatile week. 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

Gold Price Chart - XAU/USD Daily - GLD Trade Outlook - GC Technical Forecast

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

Technical Outlook: In last month’s Gold Price Outlook we noted that a break of the November opening-range kept the focus lower in XAU/USD and to be on the, “lookout for a low heading into the close of the month with December typically a supportive month for Gold prices.” Bullion registered a low at the 38.2% retracement / channel support at 1764 before mounting a rally of more than 6.2% into the December open – is a low in place?

The recovery is facing its’ first test here at confluence trendline resistance with the 38.2% retracement of the August decline just higher at 1883 – a breach / close above this threshold is needed to suggest a more significant low is in place with such a scenario shifting the focus back towards 1920 and the 61.8% Fibonacci retracement at 1956.

Gold Price Chart – XAU/USD 240min

Gold Price Chart - XAU/USD 240min - GLD Trade Outlook - GC Technical Forecast

Notes: A closer look at Gold price action shows XAU/USD trading within the confines an ascending pitchfork formation extending off the September / November lows with an embedded channel guiding this most recent advance. Initial support now 1848 backed by the weekly open at 1835– ultimately a break below the weekly low near 1820 would be needed to threaten another run at the lows.

Gold Forecast

Gold Forecast

Recommended by Michael Boutros

Download our latest quarterly Gold Price Forecast

Bottom line: The gold price collapse responded to confluence support with the recovery now approaching downtrend resistance. From a trading standpoint, look to reduce long-exposure / raise protective stops on a stretch into confluence resistance near 1884/88 – look for a reaction / pivot there with a breach / close above needed to suggest a more significant low is in place. Ultimately weakness should be limited by 1820s IF price is heading higher on this stretch. 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

Gold Trader Sentiment - XAU/USD Price Chart - GLD Trade Outlook - GC Technical Forecast

  • A summary of IG Client Sentiment shows traders are net-long Gold- the ratio stands at +3.47 (77.64% of traders are long) – typically bearishreading
  • Long positions are0.16% lower than yesterday and 14.40% lower from last week
  • Short positions are 2.56% higher than yesterday and 35.03% 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. Recent changes in sentiment warn that the current Gold price trend may soon reverse higher despite the fact traders remain net-long.



of clients are net long.



of clients are net short.

Change in Longs Shorts OI
Daily 7% 0% 5%
Weekly -9% 23% -3%

—

Active Technical Setups

– Written by Michael Boutros, Technical Strategist with DailyFX

Follow Michael on Twitter @MBForex





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