Gold Price Short-term Outlook: XAU/USD Searches Support Sub-1900

Gold Technical Outlook: XAU/USD Short-term Trade Levels

• Gold prices plummet more than 9.4% off yearly high- breaks below 200DMA
• XAU/USD risk for downside exhaustion / price inflection into upcoming support
• Resistance 1903/10 (key), 1940s, 1965– support 1871/77, 1848, 1824

Gold prices plunged more than 5% off the July highs with a three-week sell-off taking XAU/USD below the 200-day moving average for the first time since December. While the risk does remain weighted to the downside, we’re on the lookout for possible downside exhaustion in the days ahead with key support hurdles now in view. These are the updated targets and invalidation levels that matter on the XAU/USD short-term technical charts.

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Gold Price Chart – XAU/USD Daily

Chart Prepared by Michael Boutros, Sr. Technical Strategist; XAU/USD on TradingView

Technical Outlook: In my last Gold Short-term Price Outlook we noted that XAU/USD was pulling back into key support targets and to be, “on the lookout for an exhaustion low heading into August - losses should be limited to 1924 IF price is heading higher…” This level did not hold and a break / close below on August 9^th saw gold prices plunge another 2.1% before finding some support along the median-line.

An outside-day reversal yesterday is now probing resistance at former support around 1903/1910- a region defined by the 38.2% retracement of the 2022 advance, the 61.8% Fibonacci retracement of the objective yearly range and the objective 200-day moving average. We’re looking for possible inflection into this threshold with the risk weighted to the downside while below.

Gold Price Chart – XAU/USD 240min

Chart Prepared by Michael Boutros, Sr. Technical Strategist; XAU/USD on TradingView

Notes: A closer look at gold price action shows XAU/USD trading within the confines of a descending channel formation extending off the late-July highs. Note that channel resistance now converges on the 1903/10 pivot zone and further highlights its technical significance over the next few days. The next main support hurdle rests with the 61.8% extension of the May decline / November 2021 high at 1871/77- losses below this threshold could threaten another accelerated decline with such a scenario exposing subsequent support objectives at 1848 and the objective yearly open at 1824.

A topside breach / close above 1910 would be needed to alleviate further downside pressure in the near-term with broader bearish invalidation now lowered to the highlighted trendline confluence near ~1940s.

Bottom line: Gold prices remain vulnerable while within this near-term channel, but we are on the lookout for a possible exhaustion low / price inflection into upcoming support objectives. From a trading standpoint, rallies should be limited by 1910 IF price is heading lower on this stretch- look to reduce short-exposure / lower protective stops on a stretch towards 1871.

Keep in mind the July downtrend is maturing here and historical tests of the 200-DMA in gold have often spent numerous days testing the average before breaking in either direction- expect some chop. That said, stay nimble heading into Jackson Hole and watch the weekly closes here for guidance. Review my latest Gold Weekly Technical Forecast for a longer-term look at the XAU/USD trade levels.  

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--- Written by Michael Boutros, Sr Technical Strategist with FOREX.com

Follow Michael on Twitter @MBForex