Gold Facing Downward Pressure

Pyramid of gold bars
.30 Apr 2024
author avatar image Andreas Thalassinos

Table of Contents

Briefing on Gold

  • Title: Gold Technical Analysis Forecast
  • Financial instrument: XAUUSD
  • Timeframe: Daily
  • Session: London
  • Trend: Down
  • Momentum: Down
  • Trend Confirmation: Momentum Oscillator below 100, Moving Average Convergence/Divergence(MACD) below the Signal Line
  • Support Levels: 2291.35, 2266.35, 2241.76, 2172.67
  • Resistance Levels: 2352.50, 2387.16, 2431.45, 2484.65
  • Trading Strategy: Sell on Breakouts

High Impact Economic Events

  • Tuesday, 12:30 pm (GMT+0): GDP m/m (CAD) 
  • Tuesday, 12:30 pm (GMT+0): Employment Cost Index q/q (USD)
  • Tuesday, 02:0 pm (GMT+0): CB Consumer Confidence (USD)
  • Tuesday, 10:45 am (GMT+0): Employment Change q/q (NZD)
  • Tuesday, 10:45 am (GMT+0): Unemployment Rate (NZD)
  • Wednesday 12:15 pm (GMT+0): ADP Non-Farm Employment Change (USD)
  • Wednesday 02:00 pm (GMT+0): Final Manufacturing PMI (USD)
  • Wednesday 02:00 pm (GMT+0): ISM Manufacturing PM (USD)
  • Wednesday 02:00 pm (GMT+0): JOLTS Job Openings (USD)
  • Wednesday 02:00 pm (GMT+0): ISM Manufacturing Prices (USD)
  • Wednesday 06:00 pm (GMT+0): Federal Funds Rate (USD)
  • Thursday 06:00 am (GMT+0): CPI m/m (CHF)
  • Thursday 12:30 pm (GMT+0): Unemployment Claims (USD)
  • Friday 12:30 pm (GMT+0): Average Hourly Earnings m/m (USD)
  • Friday 12:30 pm (GMT+0): Non-Farm Employment Change (USD)
  • Friday 12:30 pm (GMT+0): Unemployment Rate (USD)
  • Friday 02:00 pm (GMT+0): ISM Services PMI (USD)

Technical Analysis

Gold price chart showing the beginning of a downtrend along with potential support and resistance levels.

Gold’s downward trend since April 23 began with a technical reversal pattern that occurred after reaching an all-time high of 2431.45. Specifically, the price formed a chart reversal known as a failure swing. The peak at 2417.92 failed to move higher than the previous peak at 2431.45. Instead, the price declined below the trough at 2324.24 and, a few sessions later, moved below the weekly Pivot Point. At the same time, the Momentum oscillator dropped below its 100-baseline mark, confirming the downward bias. 

This recent price action suggests a continuation of the negative sentiment in the market, with a possible sideways movement as the Upper and Lower Bands trend to converge, implying low volatility. 

Indicators and Oscillators Analysis

The Relative Strength Index (RSI) fell below the 70 overbought zone, indicating a bearish bias. However, it remains above the 50 baseline. The current price action and the RSI analysis suggest continuing the downward movement. Traders should exercise caution and not rely solely on the RSI as an indicator, as it may not be entirely dependable. 

The MACD oscillator agrees with the downward bias as it’s below the signal line, indicating a potential continuation of the decline.

On the other hand, the Exponential Moving Average remains below the price, posing a potential support area.  Also, the MACD is above the zero baseline, where the Stochastic oscillator has crossed the neutral area.

Key Resistance Levels for Gold

If the bulls take control of the market, an upside rally may find obstacles at the following resistance levels. The initial resistance level is seen at 2352.50, and further progress may result in the crossing of this level. If this happens, the next potential level at 2387.16 could come into play. The violation of this level may indicate additional potential for gains, and the next significant resistance level is estimated to be 2431.45. It is essential to keep a close eye on these resistance levels to determine the future direction of the pair.

  • R1–>2352.50
  • R2–>2387.16
  • R3–>2431.45
  • R4–>2484.65

Key Support Levels for Gold

If the bears continue to control the market, prices may continue to fall, but several support levels could prevent further declines. The first support level is estimated to be around 2291.35, followed by two more at 2266.35 and 2241.76. These support levels may challenge the market’s downward momentum. However, with careful consideration of market trends and strict risk management tools, it is possible to navigate these obstacles and minimize risks.

  • S1–> 2291.35
  • S2–>2266.35
  • S3–>2241.76
  • S4–>2172.67

Trading Strategy for Gold

Based on technical analysis, traders may be interested in adding to their positions when the price of the asset breaks through the recent support level of 2291.35

On the other hand, for traders who are more aggressive, there may be selling opportunities when the price rebounds from resistance levels. It is recommended to use tight stop-loss orders to manage risk effectively. 

If the bearish momentum continues and the candlesticks close below the Lower Bollinger Band, indicating a continuation of the downtrend, traders may want to take advantage of the declining prices by opening short positions.

Conclusion

In conclusion, the technical analysis of Gold suggests a bearish outlook with the possibility of a short-term correction to the upside, with the XAUUSD precious metal testing critical levels. Traders should closely monitor price action around key support and resistance zones and relevant technical indicators to identify potential trading opportunities and manage risk effectively in the current market environment. 

author avatar image
Andreas Thalassinos

Experienced educator with a demonstrated history of working in the financial services industry. Skilled in Technical Analysis, Market Risk, Asset Management, Stock Market, and Trading Systems. Strong professional with a MSTA by Society of Technical Analysts (UK), CFTe and MFTA focused in Master of Financial Technical Analysis from International Federation of Technical Analysts (USA).