Gold prices experienced a significant pullback on Tuesday, retreating from a record high of $3,500 as profit-taking took hold, suggesting a potential short-term peak. As of the latest data, the price of gold is hovering around $3,368, with sellers maintaining control.
If the trading session closes with gold in a similar position, a bearish shooting star candlestick pattern could form, signaling a one-day reversal. This would align with the projected target of a rising ABCD pattern, with the CD leg of the advance reaching 161.8% of the AB upswing at $3,498.
Signs of Short-Term Exhaustion in Gold’s Uptrend
Recent signs have pointed to an overextended uptrend, increasing the risk of a bearish pullback. Despite this, gold prices continued to rise amid global uncertainty, breaking through several key resistance levels. Bullish behavior was evident as gold exceeded the upper bounds of two rising parallel trend channels, confirmed by weekly closing prices. However, this upward movement has also led to increased speculation, with traders fearing they may miss out on further gains.
Potential for a Bearish Reversal
The current bearish shooting star candlestick pattern suggests the possibility of a one-day reversal if gold drops below today’s low of $3,372. The first downside target is $3,246, the previous brief trend high, which also marked the peak of a small bull pennant pattern. The pattern’s measured target was $3,454, which was surpassed earlier today. Additional support may be found around the top of the rising channel lines, with price levels varying depending on when the support is tested.
Test of 20-Day Moving Average Likely
Gold’s 20-Day moving average (MA), which was reclaimed earlier this year, could play a significant role in the current pullback. Past attempts to test the 20-Day MA as support were unsuccessful, but any further declines in price could lead to a test of this moving average at $3,153. If the price dips to this level, it is expected to find support. As the 20-Day MA continues to rise, it may reach previous trend highs, such as $3,168, where additional support may be seen.
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