Gold Short-term Outlook: XAU/USD Recovery Eyes Pivotal Resistance

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

• Gold price recovery poised to mark fourth-daily advance- up nearly 5.4% off monthly low
• XAU/USD rebound approaching downtrend resistance- risk for exhaustion / price inflection ahead
• Resistance 2663/72, 2693 (key), 2735/43- Support 2594-2602 (key), 2563, 2531/33

Gold prices surged more than 4.3% since the start of the week with a four-day rally now threatening the late-October downtrend. Battle lines drawn on the XAU/USD short-term technical charts.

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 had was threatening the August rally with the, “medium-term threat for a larger correction with the broader uptrend. From a trading standpoint, rallies would need to be limited to the monthly open IF price is heading lower on this stretch with a close below 2672 needed to keep the immediate short-bias viable.” Gold broke lower days later with the post-election sell-off plunging more than 9% off the October / record high.

Gold registered an intraday low last week just ahead of highlighted support at August high / 50% retracement of the May rally near 2531/33. The subsequent rebound is now poised to mark fourth-consecutive daily advance with gold now within striking distance of key resistance.

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 continuing to trade within the confines of a descending pitchfork we’ve been tracking off the October high. Note that the 1.382% extension of this slope caught the lows last week with the inverse extension now converging on key Fibonacci resistance just higher.

Initial resistance is being tested today at the 50% retracement of the late-October decline / September high-day close (HDC) at 2663/72 with near-term bearish invalidation now lowered to the 61.8% retracement at 2693- a breach / close above this threshold would suggest a more significant low was registered last week / invalidate the multi-week downtrend. Subsequent resistance objectives eyed at the 78.6% retracement / record HDC / November open at 2735/44 and 2787-2804.

Initial support rests with the 38.2% retracement / October low at 2594-2602 and is backed by the objective weekly open at 2563. A break below this level would threaten downtrend resumption towards 2531/33- look for a larger reaction there again IF reached. The next major support zone comes in at 2469/83- a region defined by the July high-close, the 61.8% retracement, and the July swing high (area of interest for possible downside exhaustion / price inflection IF reached).

Bottom line: A recovery off downtrend support is now approaching downtrend resistance- risk for price inflection here. From a trading standpoint, a good zone to reduce portions of long-exposure / raise protective stops – losses should be limited to 2594 IF price is heading for a breakout with a close above 2693 needed to suggest a low is in place.

Keep in mind we get the release of key US inflation data next week ahead of the monthly cross. Stay nimble into the releases and watch the weekly closes here for guidance. Review my latest Gold Weekly Technical Forecast for a closer look at the 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 X @MBForex