Gold prices continue to exhibit weakness, with the precious metal set to test key support levels near its 20-day moving average (MA). After reaching a low of $2,725 on Tuesday, gold’s recent price action has shown a continued pullback following a bearish one-day reversal last Thursday. This recent decline has been characterized by a narrowing price range, suggesting a potential test of the 20-Day MA support at $2,711.
Key Support Levels at the 20-Day Moving Average
The slow pace of the decline in gold prices could indicate that underlying demand remains resilient. Should this trend hold, support at the 20-Day MA could potentially trigger a bullish reversal. The importance of this support level is bolstered by an internal uptrend line that intersects with a similar price range, further reinforcing the potential for a rebound.
Since reclaiming the 20-Day MA on August 8, gold has consistently used this level as a reliable trend support. Although gold has dipped below the 20-Day MA on several occasions, these moves were short-lived. This history suggests that if gold approaches this key level again, it could find support and resume its upward trajectory. However, if prices drop below and remain beneath the 20-Day MA, this would signal a weakening trend, increasing the likelihood of a further decline toward the 50-Day MA at $2,633.
Additionally, attention should be paid to the 2,686 price zone, which marks the recent trend high and the top of a bull flag pattern. A drop below the 20-Day MA could test this area before gold encounters the next major support level.
Weekly Chart Concerns
A bearish pattern is emerging on the weekly chart for gold, raising concerns about potential further declines. Last week, the formation of a bearish doji shooting star pattern was completed, with gold closing below the previous week’s high of $2,747. A breakdown in the weekly chart would be triggered if gold falls below last week’s low of $2,725. This could pave the way for a deeper correction, with further tests of support at the 20-Day MA and the 2,686 price zone.
However, it is still too early to determine whether a breakdown will occur this week. Gold may remain within last week’s range, and it is possible that the metal could consolidate rather than experience a significant drop in the short term.
Reversal Patterns to Watch
Two recent reversal days have added to the uncertainty surrounding gold’s near-term outlook. After a bullish breakout on October 15, gold experienced an outside down day on October 23, followed by a sharp bearish reversal on October 31. These reversals suggest that gold may be facing additional headwinds, with further price volatility expected as traders assess potential shifts in market sentiment.
In conclusion, while gold’s near-term outlook remains uncertain, key support levels at the 20-Day MA and 2,686 price zone will be critical in determining the next direction for prices. Traders should remain vigilant and monitor price action closely, particularly in the context of broader market trends and potential geopolitical or economic developments.
Related topics:
- India Surpasses China in Gold Purchases, Buying 51% More in Three Months
- Gold Rates Skyrocket in Chennai on Diwali, 24K Gold Exceeds Rs. 81,000 Per 10 Grams
- Gold (XAU) Daily Forecast: Double-Top at $2,790 May Limit Further Gains
