Gold Short-term Outlook: XAU/USD Overbought Rally Hits Record Highs

Gold Technical Outlook: XAU/USD Short-term Trade Levels

Gold rally extends into October open- marks seventh weekly advance
XAU/USD uptrend resistance in view with monthly opening-range taking shape- risk for inflection
Resistance 3908 (key), 3982-4000, 4100/113- Support ~3800, 3760/82 (key), 3700

Gold prices ripped to fresh record highs this week, with XAU/USD extending its seventh consecutive weekly advance. The October opening range is forming just below long-term uptrend resistance, leaving the focus on whether momentum can fuel another breakout or if the overbought rally risks a near-term pullback. The broader outlook remains constructive while above this week’s low. Battle lines drawn on the XAU/USD short-term technical charts.

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Gold Price Chart – XAU/USD Daily

Chart Prepared by Michael Boutros, Sr. Technical Strategist; XAU/USD on TradingView

Technical Outlook: In last month’s Gold Short-term Outlook we noted that the XAU/USD was trading just below uptrend resistance and that, “From a trading standpoint, pullbacks should be limited to 3432 IF price is heading higher on this stretch with a close above 3600 ultimately needed to fuel the next major leg of the gold advance.” Price registered an intraday low at 3511 that day before rebounding sharply higher with the rally now extending more than 13.3% off the September low. The advance exhausted into uptrend resistance into the start of October and the immediate focus is on the monthly opening-range, now taking shape just below. Note that daily momentum remains deep in overbought territory and keeps bull in control for now.

Gold Price Chart – XAU/USD 240min

Chart Prepared by Michael Boutros, Sr. Technical Strategist; XAU/USD on TradingView

Notes: A closer look at gold price action shows XAU/USD testing the upper parallel of a multi-month ascending pitchfork extending off the May low. This slope converges on the 200% extension of the May advance at 3908 and a breach / close above this threshold is needed to mark uptrend resumption and could fuel another bout of accelerated gains. Subsequent resistance objectives are eyed at the 2.272% extension of the April decline at 3982/4000 and is backed by the 2.618% at 4100/113.

Initial support rests with the highlighted slope confluence near ~3800 and is backed closely by the weekly open / 1.618% extension at 3670/82. A break below this level would threaten a deeper pullback in gold with subsequent support objectives seen at 3700 and the 38.2% retracement of the June advance at 3649- both levels of interest for possible downside exhaustion / price inflection IF reached. Note that losses below this threshold would suggest that a more significant high is in place / a larger reversal is underway.

Bottom line: Gold is trading just below confluent, multi-month, uptrend resistance and the focus is on a reaction off this mark in the days ahead. From a trading standpoint, losses would need to be limited to 3760 IF price is heading for a breakout on this stretch with a close above 3908 needed to fuel the next major leg of the advance.

Keep in mind that although economic data is limited next week, we do get a host of central bank speakers from ECB, BoE and the Fed. Stay nimble into the monthly open and watch the weekly closes here for guidance. Review my latest Gold Weekly Technical Forecast for a closer look at the longer-term XAU/USD trade levels.

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--- Written by Michael Boutros, Sr Technical Strategist

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