Gold prices showed signs of a short-term rebound on Wednesday, testing resistance around the $2,930 level, which represents the 78.6% Fibonacci retracement. The day’s high reached $2,930, slightly surpassing Tuesday’s high of $2,928. This followed a drop to support at $2,894 earlier in the trading session. Despite these short-term bullish signs, the context within the larger market pattern remains crucial, and gold is likely to face more challenges ahead.
Bounce to Test Prior Support as Resistance
After hitting a record high of $2,956 last week, gold pulled back below previous weekly lows and broke a rising trendline, as well as the 20-Day Moving Average (MA). Support was found at $2,833 last Friday, and a subsequent three-day rally brought gold to Wednesday’s high of $2,930. However, this rally is likely a counter-trend move, aiming to test previous support areas as resistance. The true bullish momentum would require a sustained advance above the record high of $2,956.
The 20-Day MA was tested as resistance on Wednesday but failed to hold, reflecting short-term strength. As of today, the close is expected to be above this line, which is why multiple indicators are being considered in the analysis of the market’s trajectory.
Weakness Below $2,894 May Signal Bearish Reversal
Gold’s behavior following last week’s breakdown is typical for the early stages of a bearish retracement. After breaking key support levels, an upswing usually follows to test prior support as resistance. If gold drops below today’s low of $2,894, the counter-trend rally could end, and a second leg down from the record high may begin.
Next Lower Support Target Around $2,820
The analysis includes a declining ABCD pattern, which assumes that today’s high is a swing high. If this is correct, the pattern suggests an initial lower target around $2,820. This level is also supported by the 38.2% Fibonacci retracement at $2,813. Together, these levels create a strong support zone around $2,820 to $2,813, which could be tested if the bearish retracement continues.
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