Gold Price Set Up to Test Major Long-term Support Again

Gold Technical Outlook:

Gold setting up for another down-move that could begin shortly
Area around 1680 is quite big and may define a ‘macro range’

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Spot gold (XAU/USD) remains stuck in a downtrend dating back to the record high and in the near-term as well that began about a month ago. The past few days have brought a bounce with it, but that is looking like it will fail soon and bring into play major long-term support.
First, looking at the near-term the bounce currently underway looks corrective and may end at any time. Rally attempts keep failing, leading to overlapping price action which often indicates a counter-trend move is underway and not a reversal.
Should this be the case, then it shouldn’t be long from now before we see the recent low at 1688 undercut. However, if gold can start to garner a little momentum here then we could see the top of the channel dating back to the highs come into play. The upper trend-line currently resides in the 1740s.
Whether we see a breakdown occur from current levels (viewed as the more probable scenario) or a test first of the upper channel line before turning lower, XAU/USD looks poised to revisit the big lows surrounding 1680, and even break them.
The notion that we will see those lows broken is based on dollar strength not seen as letting up and impacting just about all markets in a negative manner. But support is support until it isn’t, so if there is strong price action around support then it could offer up a solid counter-trend trading opportunity.
To get gold into bullish form, it appears that not only do we need big support to maintain, but the top-side channel line needs to break. This would begin the process of turning the trend around and at the least perhaps keeping the ‘macro-range’ from around 1680 up to over 2000 intact.

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Gold Price (XAU/USD) Daily Chart

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—Written by Paul Robinson, Market Analyst
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