XAUUSD Support Bounce Finds Sellers at 2019 High

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Gold Prices Peel Back to Swing Support, Bounce up to 2019 High

Gold prices started the year with an aggressive show of strength, quickly running up to a fresh six-year-high as tensions firmed between the US and Iran. This furthered a move that showed visibly in late-December, as Gold prices had put in a topside breakout from a bull pennant formation; but this addition of fear put the theme in fever pitch as buyers rushed to the bid.

At this point, Gold has set another fresh six-year-high at 1611; but has since seen that move pull back as tensions of eased around the US-Iran scenario. This doesn’t necessarily eliminate the longer-term bullish backdrop, as another factor of importance remains of interest, and that’s the potential for more softening from global Central Banks. But, this is likely a theme that will remain behind the front page, at least for now, leading to additional pullback potential in Gold prices as that fear bid gets further priced-out of the equation.

The support looked at in last week’s article around 1535 has come in to help hold the lows. That support inflection led to a topside bounce and prices ran for more than $20 until resistance could show around 1557, which is the 2019 swing high. That level capped the highs for today and sellers appear to be on their way back into short-term Gold price action.

Gold Hourly Price Chart

gold price hourly chart

Chart prepared by James Stanley; Gold on Tradingview

Current price action is finding support around the 38.2% retracement of the November-January move and this level has already exhibited a bit of support earlier this week. This price may not hold for long, and a breach below opens the door for a re-test of the 1535 level, which was a swing-high from last September that current defines the weekly low. Below that, 1528 becomes of interest as this is the 50% marker of the November-January move; and below that is a confluent zone of interest that runs from 1515-1520. The former of those prices saw numerous resistance inflections in October-leading-into-November and provided a brief pause when Gold prices were breaking-out again ahead of year-end. But, to date, this price hasn’t yet shown much for support and if price action does volley all the way down there, this could become interesting for bullish plays again.

Gold
BEARISH

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of clients are net long.



of clients are net short.

Change in Longs Shorts OI
Daily 5% -6% 1%
Weekly -1% -6% -3%

Gold Eight-Hour Price Chart

gold price eight hour chart

Chart prepared by James Stanley; Gold on Tradingview

Gold Price Strategy Moving Forward

As looked at in this week’s technical forecast, the longer-term backdrop for Gold remains bullish in nature. This may be a bit obscured, however, by that early-year show of fear that created an outsized breakout. I had discussed the bigger-picture backdrop in Gold as one of the ‘top trade ideas’ for this year, and that was largely driven by the premise of global Central Banks remaining loose-and-passive to stoke global growth. That hasn’t really had much effect of recent, however, as the breakout was very much driven by fear.

For longer-term approaches, that confluent zone that runs from 1515-1520 could remain attractive for support plays.

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Gold Price Daily Chart

gold daily price chart

Chart prepared by James Stanley; Gold on Tradingview

— Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

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