**XAUUSD Breaks May Trend Line—But Late Shorts Beware**
*By Justin Bennett (Original Author, Daily Price Action)*
Gold (XAUUSD) stands at a pivotal point in the market, having recently shattered a key trend line that has defined its trajectory throughout May. Spot prices have delivered impressive volatility, building both intrigue and anxiety among traders. However, navigating the current landscape requires a careful assessment of both technical indicators and broader market sentiment. While bearish momentum appears to entice sellers, caution remains paramount for anyone considering late-entry shorts.
In this article, we analyze the technical backdrop behind the recent gold selloff, identify critical price levels, and outline essential considerations for traders aiming to capitalize on these dynamic movements. All insights are founded on the analysis originally provided by Justin Bennett for Daily Price Action.
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## Gold’s Technical Landscape
### The May Trend Line: A Broken Barrier
– Throughout May, XAUUSD respected a well-defined, ascending trend line that repeatedly functioned as dynamic support.
– This trend line, connecting key swing lows, mapped out a bullish channel and guided many traders’ strategies.
– Price action repeatedly bounced from this rising support, fostering a sense of stability in gold’s uptrend.
– The recent break below this trend line signaled a pivotal shift, suggesting a weakening of bullish momentum and opening the door for a pronounced correction.
### Post-Breakout Volatility
– Following the break, gold prices accelerated lower, marked by swiftly increasing trading volumes and large price bars.
– This breakdown has coincided with heightened risk aversion in equities and renewed strength in the US dollar.
– The question now revolves around whether this is a false break (a bear trap) or the start of a much deeper retracement.
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## Current Price Structure and Levels to Watch
### Immediate Support and Resistance Levels
Key technical levels now dictate trading conditions for XAUUSD:
– **Support:** The area around $2320-$2330, which aligns with prior swing highs and consolidation zones, has emerged as immediate support. Price action here may offer a pause or a turnaround if buyers regain control.
– **Next Major Support:** The $2280 region represents a more substantial demand zone. A selloff into this area could attract bottom fishers and trigger significant reaction buying.
– **Resistance:** The broken trend line itself transitions to a potential resistance. Depending on gold’s responsiveness, a retest of this former support could draw in new sellers, completing a classic “break and retest” pattern.
– **Further Resistance:** $2380-$2400 remains a ceiling. If reclaiming the trend line, this area could become the next critical battleground for buyers and sellers.
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## Confluence With Moving Averages and Historical Context
– The 50-day and 200-day moving averages cluster below current price, with the 50-day potentially providing dynamic support for any further declines.
– Historically, similar breaks in gold’s uptrends have resulted in sharp but relatively short-lived corrections, often followed by renewed bullish interest as macroeconomic drivers reassert themselves.
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## Macro Fundamentals: Forces Shaping XAUUSD
### Dollar Strength and Treasury Yields
– The US dollar’s recent rally has placed downward pressure on gold, as a stronger greenback makes commodities more expensive for international buyers.
– Concurrently, US Treasury yields are rebounding, moving capital away from non-yielding assets like gold.
– However, a reversal in either could catalyze a sharp bounce in gold prices, as positioning remains crowded on both sides of the trade.
### Inflation Expectations and Safe Haven Demand
– Despite the current sell-off, persistent inflation worries and geopolitical risks continue to underpin a robust longer-term case for gold.
– Central banks worldwide remain net buyers, viewing gold as a strategic reserve amidst fiat currency volatility.
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## Trading Considerations: Why Late Shorts Should Beware
### A Look at Positioning and Sentiment
– Momentum-driven selling in gold often entices traders
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