(Kitco News) – Gold prices are at a key inflection point at the start of October, and the employment report at the end of the week could go a long way toward determining the medium-term price action, according to Michael Boutros, senior technical strategist at City Index.
In a technical analysis published on Wednesday, Boutros said that the battle lines have been drawn on the XAU/USD charts ahead of Friday morning’s jobs report.
“Gold prices surged more than 5.2% last month with XAU/USD rallying into technical resistance at fresh record highs,” he wrote. “The weekly opening-range remains intact just below and the focus is on a possible near-term breakout into the days ahead. Battle lines drawn on the XAU/USD short-term technical charts heading into NFP.”
Looking at the technical picture for prices, Boutros said he had a constructive outlook in September ahead of the break above $2,600. “A breach above 2600 would keep the focus on a major Fibonacci confluence up near 2643/71-a region defined by the 100% extension of the 2015 advance and the 1.618% extension of the June rally,” he said at the time. “Note that numerous slopes converge on this threshold over the next few weeks and further highlight its technical significance - look for a larger reaction there IF reached.”
He said the rally stalled at this “key inflection zone” last week with spot gold unable to deliver a daily close above it. “The focus is on possible price inflection off this zone with the weekly / monthly opening-range taking shape just below,” he added.
“A closer look at gold price action shows XAU/USD trading within the confines of an ascending pitchfork extending off the April / June lows with the upper parallel further highlighting key resistance last week,” Boutros wrote. “A break below the weekly opening-range would shift the focus towards a test of the median-line / 23.6% retracement of the May rally at 2589 - look for a larger reaction there IF reached. Subsequent support rests at 2530 with broader bullish invalidation now raised to the July high close / July high at 2469/83.”
He said a topside breach of the weekly range would expose the “upper parallel” near $2,700 per ounce. “[A] daily close above this slope is needed to mark uptrend resumption with such a scenario likely to fuel another accelerated rally towards subsequent resistance objective at 2743 and the 2.618% extension of the 2022 range at 2804,” he added.
Boutros noted that the yellow metal is now trading just below uptrend resistance to start October, with the weekly opening range taking shape just below. “From a trading standpoint, the focus is on a near-term breakout for guidance - losses should be limited to 2589 IF price is heading higher on this stretch with a close above 2700 needed to fuel the next major leg.”
He cautioned that the market is just beginning to carve out the monthly opening range as it receives the September nonfarm payrolls report on Friday. “Stay nimble into the release and watch the weekly close here for guidance,” he said.
Spot gold last traded at $2,652.41 per ounce and is down 0.42% on the session.
