Gold Technical Analysis (XAU/USD)
- Gold breakdown analysis and levels to watch
- Retesting the recent support level (now resistance) adds to the bearish outlook
- Momentum across the MACD is supporting lower prices while the RSI indicates that there is more room to go
- The analysis in this article is used chart patterns and key Support and resistance levels. For more information visit our comprehensive website Educational library
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Gold breakdown analysis and levels to watch
Gold extended a decline that started after hitting an all-time high of 2081.82 in early May after a resurgence of regional banking problems in the US that culminated in JP Morgan’s absorption of troubled First Republic Bank. The bearish move ran out of steam and entered a period of consolidation near the bottom border of the ascending channel (refer to the daily chart) before the renewed bearish momentum resulted in a breakout and stability below the ascending channel on the weekly chart.
From the current levels, 1875 emerges as the most relevant support level as it has acted as a pivot point on multiple occasions although this came in the form of resistance, driving prices higher at the time. However, it is a crucial level for both bulls and bears. Now that prices have closed below the upward sloping channel, the next level of resistance appears all the way back at 1956 – the previous level that kept the bulls at bay.
Gold XAU/USD weekly chart
Source: TradingView, prepared by Richard Snow
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Retests like textbooks point to more negatives for gold
Breakouts and breakdowns usually tend to retest the level that was just broken, which means that pullbacks are often noticed after breaks. Over the weekend, geopolitical tensions picked up a notch in Eastern Europe, which saw gold prices retest 1937 and the bottom side of a rising channel before heading lower in the subsequent trading sessions.
Prices are now trading below the 1915 level which was support for March and April last year. A close below this level on the daily chart adds to the bearish outlook, with plenty of room to run ahead of 1875 and the 200 SMA coming into play. The resistance is at 1937 on the daily chart.
Gold XAU/American dollar daily chart
Source: TradingView, prepared by Richard Snow
– Posted by Richard Snow for DailyFX.com
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