Gold Prices Approaching Major Trendline Resistance

Gold prices (XAU/USD) pushed higher today to trade at fresh one-month highs. Prices are approaching critical resistance and a reaction from it will be important for the medium-term trend.

A declining trendline in gold prices originating from the high posted in July is considered important as it held prices lower on a spike high during the US election and once again in mid-April. A horizontal level at 1277 marks prior resistance from last March and is found within close proximity of the trendline.

An upside break of the trendline would carry bullish implications for gold prices over the medium-term, especially following the bullish trend seen in the first half of 2016. At the same time, a rejection from the trendline could trigger a major downturn.

Gold Prices (XAU/USD) Daily Chart

Gold Daily May 31

On a daily chart, the pair trades within a rising channel from lows posted towards the end of 2016. Price action currently falls at the mid-point of the channel.

On a 4-hour chart, a channel has contained price action since May 18th. Gold prices are currently seen testing the upper line of the rising channel.

There have been some recent bullish developments as a rally on May 17th triggered a push back above the 200 DMA. Gold prices also held above 1250 support last week following the Fed meeting minutes release and have since taking out resistance near 1260 which had held prices lower on two prior attempts. The monthly chart, however, is likely to print a bearish hanging man candle, hinting of a reversal.

Gold Prices (XAU/USD) 4-Hour Chart

Gold 4H May 31

Jignesh is an analyst and trader, specializing in currencies and commodities. He utilizes a macro view as well as a proprietary method of pattern recognition that is based on the principles of Elliott wave. His focus is to assess strength in trends, and perceiving high potential turning points in the markets. He brings over 4 years of experience in his current role.