XAU/USD Stalks Technical Support Around $1,870.

Gold Technical Outlook: Neutral

Gold Price Action

Gold prices have fallen back into a narrow range of support and resistance, forming around the key Fibonacci level of $1871.6. With the 23.6% retracement of the 2018 – 2022 move helping cap the upside move at the start of the year, the same level has come back into play as support.

After rising to a nine-month high of $1975.2 (on 2 Feb 2023), bullish momentum faded, driving XAU/USD lower. As an influx of sellers entered the market, a bearish engulfing candle appeared on the daily chart, signaling the potential for a bearish reversal.

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With the body of the candle extending beyond the open and close of the previous day (1st of Feb), price action fell to another key zone of technical significance around the $1930 handle.

Gold (XAU/USD) Daily Chart

Chart prepared by Tammy Da Costa using TradingView

While the psychological level provided resistance in mid-Jan, it also formed as trendline support from the November low. With the rising trendline from the 2018 move holding as resistance on the weekly chart, a break below $1930 resulted in the same technical technical patterns forming (bearish engulf) on the longer-time frame.

As gold prices continued to decline, downward momentum gained traction before stabilizing around $1880. Below this level is the 23.6% Fibonacci retracement discussed above, which continues to hold at $1871.6.

Gold (XAU/USD) Weekly Chart

Chart prepared by Tammy Da Costa using TradingView

However, with the recent weekly and daily candle both consisting of a shallow-body, XAU/USD may continue to search for a fresh catalyst to drive the next big move.

Gold (XAU/USD) Technical Levels – Looking Ahead

For gold bulls to regain confidence, a clear break of $1900 and above $1903 (38.2% retracement of the 2022 move) could drive prices back to the next barrier of resistance at $1930 before heading back toward $1950.

On the contrary, a resurgence of bearish momentum below $1871.6 could drive price action to the 50-day MA (moving average), holding as additional support at $1859.4. The January low would then step in as the next target for sellers at $1829.9, paving the way for further losses toward $1800.

— Written by Tammy Da Costa, Analyst for DailyFX.com

Contact and follow Tammy on Twitter: @Tams707