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Gold Price Forecast: Gold Bear Flag – but Can Sellers Drive XAU/USD?

Gold, XAU Talking Points:

After a quick sell-off to start last week, Gold prices found support around the three-week-low and has since held the line. There’s a number of macro themes firing off in the background at the moment and this week’s U.S. CPI print is likely playing a role in the lack of current volatility in Gold prices. Traders await another CPI release after the past two months showed blowout beats to the expected print, and for this month, there’s the expectation that headline CPI will climb above 7% for the first time in over 30 years.

This is perhaps a reason why Gold prices didn’t test deeper support last week even as US Treasury Yields spiked, with the 10-year now trading at a fresh high since the pandemic came into the equation almost two years ago. And that rates theme has had a large role in the performance of Gold prices in that pandemic backdrop.

Gold spiked from April-August of 2020; but as Treasury Yields began to climb in August of 2020 Gold prices started to show symptoms of a top. What started as a bearish engulfing candlestick on the daily chart soon turned into an aggressive pullback, and as news of vaccines hit a week after the 2020 election, that pullback turned into more of a reversal theme that still has yet to abate.

Since then, and for the entirety of 2021 trade, Gold prices ranged with a bearish bias. There’s now a descending triangle on the weekly chart and such formations are often followed with the aim of bearish breakdown potential. Support around 1680 came into play thrice last year; and resistance has been showing a series of lower-highs with a recent grind around the confluent area at the 1830 level. That resistance held the highs over the past two weeks.

Gold Weekly Price Chart

gold weekly price chart

Chart prepared by James Stanley; Gold on Tradingview

Gold Shorter-Term

Shorter-term, Gold prices have been chomping between range support and resistance for a few weeks now. That confluent spot around 1830 has now held two resistance inflections, with the most recent leading to a push down to a lower-low as buyers came into offer support at the familiar level of 1784. That level was traded at early on Friday morning, after which sellers have continued to pull back off of the throttle to allow for a short-term bear flag to form – which can keep the door open for bearish scenarios this week.

Gold Four-Hour Price Chart

gold four hour price chart

Chart prepared by James Stanley; Gold on Tradingview

Gold Levels

That 1784 level is a fairly obvious spot of support. But, below that are two other highly relevant levels at 1771 and 1752, which currently functions as the three-month-low in Gold prices. A breach of that 1752 level brings up the possibility of a test of big picture support, around the same 1680-1700 level that was in play three times last year.

Above current price action, 1800 is near-term resistance, after which 1815 and 1830 come into play. Bulls aren’t necessarily out of the woods beyond 1830 either, as the 1876 level remains prominent for the longer-term scenarios.

Gold Four-Hour Price Chart

gold four hour price chart

Chart prepared by James Stanley; Gold on Tradingview

— Written by James Stanley, Senior Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

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