Gold prices have rallied more than 1.8% since the start of the week with XAU/USD building on last week’s reversal off technical support. The advance is now facing its first test of downtrend resistance and we’re looking for a reaction just higher for guidance. These are the updated targets and invalidation levels that matter on the XAU/USD technical charts heading into the close of a volatile week

GOLD PRICE CHART - XAU/USD DAILY
Technical Outlook: In last month’s Gold Price Outlook we noted that a break of the November opening-range kept the focus lower in XAU/USD and to be on the, “lookout for a low heading into the close of the month with December typically a supportive month for Gold prices.” Bullion registered a low at the 38.2% retracement / channel support at 1764 before mounting a rally of more than 6.2% into the December open – is a low in place?

The recovery is facing its’ first test here at confluence trendline resistance with the 38.2% retracement of the August decline just higher at 1883 – a breach / close above this threshold is needed to suggest a more significant low is in place with such a scenario shifting the focus back towards 1920 and the 61.8% Fibonacci retracement at 1956.

GOLD PRICE CHART - XAU/USD 240MIN

Notes: A closer look at Gold price action shows XAU/USD trading within the confines an ascending pitchfork formation extending off the September / November lows with an embedded channel guiding this most recent advance. Initial support now 1848 backed by the weekly open at 1835- ultimately a break below the weekly low near 1820 would be needed to threaten another run at the lows.

Bottom line: The gold price collapse responded to confluence support with the recovery now approaching downtrend resistance. From a trading standpoint, look to reduce long-exposure / raise protective stops on a stretch into confluence resistance near 1884/88 – look for a reaction / pivot there with a breach / close above needed to suggest a more significant low is in place. Ultimately weakness should be limited by 1820s IF price is heading higher on this stretch.

Reference by: Michael Boutros, Technical Strategist with DailyFX