Gold Price Forecast – Trend to Reverse from 7-year High

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Intensified US-Iran conflicts remain in the spotlight. The gold prices flared up on Friday when the Iranian military official was killed. The positive trend in gold prices continued even on Monday.

Now, there have been few sell-offs happening in gold yesterday, displaying a slight retreat. And, though Iranian’s retaliated, it seemed to be a non-escalated one. Hopefully, the issues might get resolved soon, bringing back peace. Therefore, I expect gold prices to decline/reverse in the upcoming sessions from its seven-year high.

Meantime, let’s give a glance over the US Dollar Index, the denomination of the gold prices. After touching the multi-month low near 96.38 mark, I can see the USD Index escaping upwards as a fresh start to 2020. During the same time, despite the dollar rise, the gold prices had continued to hold on its support region, which is something intriguing.

Technical Analysis

1-Week Chart

The gold prices have reached their 7-year high mark. Now, as I look into the weekly chart, I notice an inverted hammer candlestick. Usually, such a candlestick represents a prelude for a near term reversal. And, the body of this inverted hammer might get furthermore shorter by the weekend.

XAU/USD 1 Week 08 Jan. 2020
XAU/USD 1 Week 08 Jan. 2020

Also, if the prices initiate a decline this week, it might mark the weekly closing near $1573.53 or 23.6% Fibonacci level. On the lower side, the significant SMAs continue to stay intact, supporting the powerful bulls.

1-Day Chart

Though there has been a rebellious breakout from a strong resistance region, technical indicators are currently signaling the chances of a pullback.

XAU/USD 1 Day 08 Jan. 2020
XAU/USD 1 Day 08 Jan. 2020

 

The Parabolic SAR continues to remain beneath the trading entity. However, the distance between the indicator and the XAU/USD pair has diminished significantly. In the coming sessions, the indicator might jump above the pair, activating the bears.

Needless to say, the same aforementioned breakout region might act as a support region upon retracement of the pair.

4-Hour Chart

On the 4H chart, the uptrend continues to remain the primary trend. However, signs of weakness have started showing up in the price actions.

XAU/USD 240 Min 08 Jan. 2020
XAU/USD 240 Min 08 Jan. 2020

The XAU/USD pair continues to trade along the upper corner of the Bollinger bands. But, the candles appear to deviate more towards the center line of the Bollinger bands, losing grip. The Stochastic Oscillator was also indicating a slowing overall momentum, hovering near 62.92 level.

Nevertheless, any downside move would immediately turn on the support levels stalled near $1575.77 or 23.6% Fibo. retracement level.