Gold Technical Forecast: Bearish

Gold prices enter May with quite a downside potential. And given that the Fed engines are expected to hike rates while warning that more are to come, there could be more downside for gold prices. And that’s quite the change from just a month ago.

As the gold came in April, the bulls had found some stability on a long-term support/resistance zone that ranges from 1900 to 1923.70. The first of these prices is a major factor psychological level while the latter was the all-time high for almost a decade in gold, until the breakout in the summer of 2020. This support build allowed for some price equilibrium which the bulls took advantage of, forcing eventually an upside move that presented some breakout potential, and this led to a test of the psychological level of $2,000 two weeks ago.

But, after this negotiated level, things quickly started to change and sellers started showing a more forceful hand. Prices eventually pushed back the 1900-1923.70 support zone and this time the sellers started to gain further ground. When I looked at gold on Monday, I highlighted downside potential, focusing on a push to a deeper support level around an earlier resistance point, taken around 1879. is traded on Wednesday and Thursday, with the seller setting a new two months. -low before a rapid pullback develops.

And when the pullback developed, the price found resistance at the “r2” price I looked at in this Monday post before returning to the 1900 level.

The net result of Friday’s price action was a shooting star showing a rejection at this second level of resistance at 1918.30. The weekly close below 1900 is also a bearish factor that will remain relevant for next week‘s open.

Daily Gold Price Chart

Chart prepared by James Stanley; Gold on Tradingview

Gold Technical Forecast: Bearish

For next week, there is a risk of a major event on the economic calendar. The Federal Reserve’s rate decision is the obvious one, but there’s also NFP on Friday. Perhaps more pressing, the fear around what the FOMC might say or do on Wednesday has clearly already had a significant impact on markets, and as the world braces for higher rates in the US, it doesn’t seem not that there is an easy way out for the Fed.

From the weekly chart, we can get a better idea of ​​the key support zone that was tested this week. This area provided support for almost a full month after the initial spike in February following the Russian invasion of Ukraine. But, as sellers begin to grind price below this key point on the chart, additional pressure may allow deeper bearish movement towards the swing around 1843.30.

Gold weekly price chart

Chart prepared by James Stanley; Gold on Tradingview

Short term gold: levels for the next week

Below Gold there are a few key areas to keep in mind, particularly if a larger breakdown chart begins to emerge. There is a pocket of potential support from 1888 to 1891, and if the sellers can break through that, we have the same 1879.50 level I talked about on Monday. This is followed by gold’s current two-month low at 1871, and a breach below that opens the door for significant decline, towards that 1843 support discussed above.

On the resistance side, I’m keeping the same levels used this week, plotted at 1908 and 1918 with the 1923.70 level serving as the “r3” point of potential resistance.

Four Hour Gold 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