- The overall trend in gold remains bearish, but a daily closing above 1,433.70 USD/oz would confirm a more sustained rally and would act as a confirmation of a double-bottom technical formation.
- For the continuation pattern to the downside to find renewed selling interest, we look for a daily closing below 1,272.80, which would give scope for a test of the 2013 lows at 1,180.19.
Gold prices have tumbled in what has seemed an almost unabated selling wave since late last year. With spot gold prices somewhat consolidating, however, the shiny instrument has arrived technically at a rather interesting point, with two distinct technical formations now potentially showing the way. Below, we provide for a detailed technical outlook for the spot gold (XAUUSD) with focus on both sides of the market and key trigger levels that warrant attention.
The overall technical trend in XAUUSD is still trending with a bearish bias, but the pair also looks to be at a crossroad where two strong technical formations are shaping up. We expect that should we get a technical confirmation with a closing below/above (see for details below) it would set the stage for a more sustained trend in the upcoming months.
Double-bottom formation
XAUUSD is showing a potential double-bottom formation stemming from the August 7 lows at 1,272.80 and the October 2 lows at 1,277.47. The neckline resistance for this formation is at 1,443.70, which, if reached, would also encompass a closing above the 38 percent retracement in the 1,795.91-1,180.19 wave.
This would technically give scope for a more sustained upside corrective rally, with a short term target of 1,488.05 and eventually the double-bottom target of 1,594.60.
Spot gold on a daily scale depicting the double-bottom formation
A heads up
The head-and-shoulder formation was confirmed technically on October 1 as we had a close below the neckline support, but XAUUSD has so far been capped at the 61 percent retracement in the latest 1,180.19-1,433.70 wave.
The preferred technical scenario would be a closing below 1.272.80, which would give scope for a short term target of 1,240.02 and eventually 2013 lows at 1,180.19. This is to be the preferred scenario, as the continuation pattern on the downside would support the overall downtrend.
Spot gold on a daily scale depicting the head and shoulder formation