Gold Price Forecast: XAU/USD Holding Support but Bears Threatening Break

Gold, XAU/USD Talking Points:

• Gold bulls are holding on but the yellow metal has been mean-reverting for more than two months at this point.
• Sellers haven’t been able to make much ground below $2,300/oz but they have continued to respond aggressively to bounces, which has helped to cap highs over the past couple of weeks.
• After ranging for more than three years, spot Gold prices haven’t yet re-tested for support at prior range resistance. This opens the possibility of an intermediate-term sell-off that could produce that support test, opening the door for the longer-term bullish trend to continue.

It was a fast and aggressive trend that started in Gold last October, and the context at the time made it all the more interesting.

In May of last year Gold tested a bullish breakout but, once again, failed to drive through the $2,075 level that had held the highs in both 2020 and 2022. Initially, the pullback started mildly but as the Fed retained a relatively-hawkish view last summer, bears got more and more momentum until, eventually, spot gold pushed into a heavily oversold state.

The NFP report last October produced an outside bullish bar on the daily chart, and then that weekend is when tensions increased in the Middle East and the following Monday saw a strong bullish move develop from that oversold backdrop. And by December, price was already up at resistance, ready to test a break which ultimately failed.

But – the pullback from that failed breakout couldn’t make it very far below the $2,000 psychological level and as bulls loaded the boat, the Fed sounding very dovish in March helped to finally cauterize the bullish breakout, with prices quickly flying into the $2,400 level.

Gold Monthly Price Chart

Gold – Gaining/Lacking Acceptance

The $2,300 breakout in Gold hit during the first week of Q2 trade, with $2,400 coming into the equation a week later. And there remained heavy enthusiasm from buyers at the time, as a dovish Fed even despite a strong labor market with high inflation showed that the bank really didn’t seem to want to raise rates.

But that psychological level at $2,400 remained problematic as it elicited two strong resistance tests in April, before prices finally pulled back to begin testing the $2,300 level. Buyers were able to hold the line into the May open, at which point another dovish FOMC meeting on the first of the month helped to keep bulls on the bid. And then for the first few weeks of May, bulls took control again for another test above the $2,400 big figure.

That time – they were able to touch a new psychological level, albeit a minor one, at the $2,450 level. And that, again, led to profit taking from bulls that had ridden the move to fresh highs.

There was another strong pullback that showed around the NFP report on the 7^th of June, with the US labor market again putting in a strong showing through that data point.

From the daily weekly below, we can see the impact of that NFP print as prices was pushed down to the $2,300 level again. But bears couldn’t gain acceptance below the big figure to finish the week, and then last week saw the first green weekly bar in Gold since the current high was established.

Gold Weekly Price Chart

Gold Daily

The daily chart highlights that support build around the $2,300 level fairly well. It also illustrates how aggressive sellers have been on tests of resistance, such as we saw two weeks ago at the 2372-2378 zone and then last week with 2336.

This also highlights a pattern resembling a head and shoulders. I’m picky with those formations and this one doesn’t quite fit the bill, but there are components of that which remain in-play. The left shoulder would be marked by the resistance hold at the 2400 level, with the head represented by the run up to $2,450. The neckline-like backdrop would be drawn around the $2,300 level that’s continued to provide support in varying ways of the past two months.

While the right shoulder remains weak and doesn’t quite fit the definition of a head and shoulders, the takeaway here would be the same, and that’s the importance of support around the $2,300 level. And, like a head and shoulders pattern requiring a neckline break to come into play, if sellers can finally gain acceptance below the $2,300 level, there could be an open door for price to move down to re-test that longer-term level at $2,075, which was prior range resistance; and notably, that level has not been tested for support since the breakout in March.

Gold Daily Price Chart

Gold Shorter-Term: Levels

Even though Gold has been mean-reverting over the past two months, that doesn’t mean that there haven’t been shorter-term trends to work with.

The NFP-fueled sell-off in the week before last hit after resistance held at the $2,372-$2,378 zone, and last week saw two resistance tests at the Fibonacci level of $2,336. The $2,319-$2,326 zone has remained in-play, as well. For resistance potential, there’s also the $2,350-$2,354 zone that was very active into the June open, and it even helped to set support before the push up to $2,372-$2,378, so that remains highly relevant should bulls muster another topside push.

For support, we can see a higher-low from last week with the hold of $2,300, and this is what buyers would need to defend to keep the door open for bullish scenarios. If the fail, and sellers are able to start taking control again, that open area from $2,300 down to prior range resistance in the $2,075 area would be vulnerable.

Gold Four-Hour Price Chart

--- written by James Stanley, Senior Strategist