Gold prices hit a new record high of $3,149 on Tuesday, continuing its bullish trend, but encountered resistance near this level, resulting in an intraday pullback. As of the latest data, gold is trading between $3,101 and $3,149, and it may close within this range. This price action has sparked concerns of a potential bearish reversal unless key support levels hold.
Resistance and Potential Bearish Reversal
Gold’s rise to $3,149 has encountered resistance near this price level, forming a bearish shooting star pattern. A shooting star is a candlestick pattern often seen as a sign of a reversal, and in this case, it suggests a pullback in gold prices unless support holds. The $3,101 level is crucial—if gold breaks below this price, the shooting star pattern will be validated, potentially leading to a deeper correction.
Resistance Level: The $3,153 price target lies just above the recent high, which is the 261.8% extension of the retracement from February’s decline. This makes it a critical resistance point.
Bearish Pattern: The shooting star pattern suggests that gold may struggle to break through this resistance, signaling that the rally could be running out of steam for now.
Trend Channels and Support Zones
Gold’s price action is vibrating within rising trend channels, which can help determine support and resistance as the price progresses.
Blue Channel Line (Shorter Channel): The recent high of $3,149 aligns with resistance at the blue channel line, which marks the top of a shorter rising trend channel. While gold initially exceeded this level during the day, the subsequent bearish reaction indicates that resistance is forming around this zone.
Larger Purple Channel: The larger purple channel, which represents a broader trend, showed some bullish behavior when gold exceeded its upper boundary earlier. This breakout, if sustained, would have triggered a bullish continuation. However, the current weakness in price suggests the breakout may fail unless further strength is seen.
Weakening Momentum
Although gold exceeded the purple channel’s upper boundary, which established support at that line, momentum has weakened since then. The Relative Strength Index (RSI), which tracks the strength of price moves, indicates that gold may be approaching overbought conditions. This suggests that the rally may be losing momentum, and a pullback could be imminent.
If the bearish shooting star pattern holds, potential support levels to watch are:
$3,077
$3,058
These levels could act as potential areas of support, providing a cushion for gold if the pullback materializes.
Bullish Continuation Scenario
Despite the potential for a pullback, the bullish trend is still in play. If the larger purple channel breakout holds and support remains intact near the top purple line, gold could extend its rally. In this case, the price targets could rise to:
$3,153 (the next resistance level)
$3,170 (a key bullish target)
Conclusion
Gold’s price is at a pivotal point. The current market is testing key resistance levels, and the potential for a bearish reversal exists if support fails. A pullback could see gold retesting lower levels around $3,077 or $3,058. However, if support holds and the breakout from the larger purple channel proves valid, gold could continue its bullish momentum, with targets around $3,153 and $3,170.
For investors, this is a crucial time to watch for signs of either a bearish pullback or a continuation of the rally. A break below $3,101 would suggest a potential bearish reversal, while sustained support above this level could see gold push higher towards new record highs.
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