Gold prices, as measured by the XAU/USD pair, are trading with a modest bearish bias in the short term. XAU/USD fell to a low of $3,311.61 following a sharp drop on Thursday. Nevertheless, it has recovered since and is presently trading around that key support level of $3,325. The market, in my opinion, has entered an initial consolidation period. Traders are now keenly focused on several important technical inflection points that will likely shape the near-term price trajectory.
The 4-hour chart for XAU/USD reveals that the pair is struggling around a mildly bullish 20 Simple Moving Average (SMA). This SMA has stayed pretty flat too, a sign that there is not a lot of momentum in either direction. Together these two are testing the mildly bullish 200 SMA. This raises the concern that it too might have a hard time laying down a more solid upward trend. The daily chart indicates that XAU/USD is still grappling with the majority of its intraday losses from the previous trading session. This new development is adding a healthy dose of pessimism among traders.
XAU/USD is holding above a key Fibonacci support level. This important level is the 38.2% Fibonacci retracement of the June descent, located at roughly $3,325. This level is important because it is both a psychological and technical barrier for traders to overcome. Should this pair break below this support, it would likely indicate more bearish activity is on the way. Right now, it seems like it’s holding steady just above this key line in the sand.
Besides the Fibonacci support, there are some other important levels that XAU/USD has formed and traders are paying close attention to. Support levels are at $3,325.00, $3,311.90, and $3,295.45 and resistance levels at $3,350.00, $3,373.50, and $3,389.40. The clustering of these levels provides a trading range that day traders and swing traders are likely to take advantage of in the near term.
Technical indicators for XAU/USD offer a glimpse into underlying market dynamics. For now, three of these indicators are going south into the double negative territory but have stopped going down after crossing their midlines. The Relative Strength Index (RSI) for XAU/USD has seen a modest recovery from its midpoint 50 line. This rebound indicates that momentum is indeed bottoming, setting up the prospect of upward movement in the future.
XAU/USD is now trading just above the $3,325 level. Market participants should be cautiously optimistic about its possible return to the comfort zone just above $3,350 awaiting the next directional catalyst to reveal itself.
Support and Resistance
Support and resistance levels will be important for gold prices moving forward. Their contributions will either strengthen gold or drive it further down in the days ahead.