Gold Price Forecast: XAU/USD Breakout Pushes Towards Fresh ATH

Gold Talking Points:

• The bullish trend in gold has continued after last week’s pullback saw buyers defend the 2600 psychological level.
• Before that pullback, the last notable retracement in gold showed after the FOMC rate decision saw 2600 come into play for the first time ever, which led to a pullback to 2550. Notably, the breakout leading into FOMC had begun at the European Central Bank rate decision a week earlier and tomorrow brings another ECB meeting with a highly expected rate cut.

The trend continues to impress in gold and as global central banks get more dovish or retain dovish postures even in light of strong economic data. There have been shorter-term pullbacks, however, and for those looking to establish bullish exposure in gold that’s been the only amenable route of late, as gold remains overbought on both weekly and monthly charts. But, as I pointed out a few weeks ago its debatable as to whether that matters much given the current fundamental backdrop combined with the trend that’s remained strong for most of 2024, thus far.

It was in these pieces last week that I talked about the prior pullback. Gold had started to sell-off just ahead of my Tuesday webinar last week and as I shared then, it was the 2600 level that was of interest, as that could show just how aggressive buyers remained to be after a pullback scenario.

And then on Thursday, even with a strong US CPI report, gold held the same higher-low that was in-play after the post-FOMC breakout and then started to rally, with another shorter-term higher-low showing at 2616.96 before bulls eventually pressed through the resistance side of a bull flag formation.

To be sure, the expected rate cuts in many developed economies are playing a role here. But, perhaps more interesting is what happened last month after the FOMC rate cut was announced, and from that, there may be some workable strategy potential for traders into the end of this week.

Gold Four-Hour Price Chart

Chart prepared by James Stanley; data derived from Tradingview

Gold Pullback from the Big Figure at FOMC

The prior pullback that showed in gold happened amidst an interesting backdrop. Gold had broken out after the ECB rate cut announcement on September 12^th and left the 2530 level behind. That breakout ran cleanly until prices began to stall at 2590, in an apparent respect of the next major psychological level overhead at 2600.

But it was when the FOMC announced their 50 bp rate cut on September 18^th that the metal was finally able to put in a test of that rounded price. It was brief, only for a few minutes, and then prices dropped even as the Fed continued with a dovish refrain. I talked about this in the aftermath of the move, highlighting the support that had come into play at a zone around the 2550 level.

It didn’t take long for buyers to get back on the bid as it was just hours later that a higher-low developed, leading to a breakout above 2600 on Friday of that week.

At this point, we’ve seen similar stalling inside of 2700 that had shown at 2600, and this is something of interest as we move towards the ECB’s expected rate cut tomorrow.

Gold Hourly Price Chart: FOMC Pullback Launches into Fresh Breakout

Chart prepared by James Stanley; data derived from Tradingview

Gold Big Picture

As I’ve been saying, I have little interest in bearish scenarios in gold largely because of how incredibly strong that trend has been. But that also doesn’t mean that I want to just chase and hope, as those tend to be terrible strategy parameters, in my experience.

But, with that said, shorter-term pullback potential can remain of interest and given that we have another major psychological level sitting overhead that bulls haven’t yet wanted to test, I can look for an element of short-term resistance to show from that. In that scenario, 2685, the prior ATH, becomes an obvious point of reference for higher-low support potential. But there’s also the 2670 level that’s shown as resistance on a couple of different occasions that also retains interest for support.

If we do get a pullback before a test of 2700, those same levels would apply as possible higher-low support potential. But, in continuation scenarios thereafter, the initial resistance targets would be a re-test of 2685 and then the big figure at 2700. 

Gold Daily Price Chart

Chart prepared by James Stanley; data derived from Tradingview

--- written by James Stanley, Senior Strategist