Gold Recap
After reaching multi-month highs above $2,070 in March last year following the Russian invasion of Ukraine, gold quickly reversed its geopolitics-induced advance, plunging below $1,620 at one point in late 2022. This dramatic downward correction, however, was short-lived, with bullion resuming its upward trek shortly, thereafter, guided higher by an impeccable trendline extended from the November lows, as shown on the chart below.
The rising trendline described above acted as strong dynamic support for several months, successfully repelling bears and triggering reversals after periods of weakness on numerous occasions, but was finally breached just before the end of the second quarter. This breakdown, which cast a shadow over the technical picture, reinforced selling pressure, causing bulls to abandon ship and driving prices to their lowest level in more than two months at the time of writing.
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Gold Futures Daily Chart
Source: TradingView, Chart Prepared by Diego Colman
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While the outlook is not extremely bearish, the situation could worsen if XAU/USD slides below support at $1,920. This floor has held so far, but if it gives way on a sustained basis, bears may become emboldened to launch an attack on $1,880. On further weakness, sellers are likely to set their focus on $1,850, near the 200-day simple moving average and the 50% Fibonacci retracement of the Nov 2022/May 2023 rally. Below that, the next downside area of interest may be at $1,800.
In the event of a bullish turnaround, there are several hurdles to overcome to be confident that the worst is over and better days are ahead for the precious metal. That said, the first resistance worth keeping an eye on appears at $1,975. Successfully piloting above this barrier could inject optimism into the market and pave the way for a retest of the psychological $2,000 level. While bulls may struggle to push prices above this area, a breakout could keep the dream of new highs alive.
of clients are net long. of clients are net short.
| Change in | Longs | Shorts | OI |
| Daily | -14% | 26% | -4% |
| Weekly | -3% | 5% | 0% |
Gold Futures Weekly Chart
Source: TradingView, Chart Prepared by Diego Colman
This article only covers gold’s technical outlook. If you would like to learn about the fundamental catalysts that may impact the precious metal in the medium term, download DailyFX’s complete their-quarter trading guide by clicking the link below. It’s free!
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