Gold Price Prediction: XAU/USD Death Cross pattern emerging, what it means, levels to watch

When the Golden Cross pattern emerged in gold in early December, it marked the beginning of the uptrend. While XAU/USD continues trading in an upward channel since the middle of last month and up to now, the writing is on the wall for a move in the other direction.

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When the 50-day Simple Moving Average (SMA) crosses above the 200-day SMA, it is called a "Golden Cross" – a bullish pattern. It last happened on December 2 in gold, when XAU/USD was trading below $1,780. Since then, the precious metal has been on an uptrend, nearly reaching $1,850 on Thursday. 

On its way up, XAU/USD has been trading in an uptrend channel since December 15, when the Federal Reserve's decision temporarily sent to $1,752. This near $100-dollar move may be about to end despite upside momentum and the uptrend channel. That is due to the opposite of the Golden Cross pattern – the Death Cross pattern.

The Death Cross is when the 50-day SMA crosses the 200-day SMA to the downside. As the chart shows, the 50-day SMA (blue line) is leaning lower and the 200-day SMA is edging higher. They are about to "kiss" and then cross at around $1,805 (thick black line).

The move seems inevitable and it will likely be followed by a downfall. Where to? All the way to $1,752. On the way down, there are plenty of support lines, including $1,829, $1,823, $1,810, $1,805, $1,800, $1,790, $1,785 and $1,762. 

Bulls would be emboldened if XAU/USD recaptures $1,844 and more importantly $1,850. That would open the door to $1,865 and $1,900.

Gold Fundamental Analysis

Fundamentally, gold remains at the mercy of US 10-year yields. Returns on Uncle Sam's debt are rebounding toward 1.80%, up tumbling all the way from 1.90% to 1.75%. As gold has no yield, it competes with the safety of holding American debt. Bigger moves in yields tend to have more impact on the precious metal than slow-moving changes.

The next significant event to watch is the Federal Reserve's decision on January 26. If the bank signals an imminent rate hike in March and potentially bond-selling later this year – withdrawing money from markets – yields would jump and gold could suffer. Conversely, if Fed Chair Jerome Powell and his colleagues send a soothing message of ongoing support to the economy, XAU/USD could avoid the kiss of the Death Cross.