Gold prices retreated on Thursday, slipping to a three-day low of $3,298 as the metal tested a key support zone near the breakout level of a previously confirmed bull flag pattern. Despite the decline, the broader uptrend remains technically sound, with bullish patterns still offering potential for upward continuation.
Breakout Confirmation and Weekly Signal in Play
The recent breakout from a bull flag pattern was triggered on Monday and confirmed with a daily close above the upper boundary of the formation. Momentum strengthened further on Tuesday, as gold closed above a minor swing high at $3,371, reinforcing bullish sentiment.
Additionally, this breakout marked a move above last week’s high of $3,353, initiating a possible weekly breakout. However, for the bullish signal to be validated on the weekly chart, gold must end the week above this level. With Friday’s close looming, the metal must recover promptly to secure the signal, though sellers currently dominate the market.
Support Levels Tested as Sellers Take Control
As of Thursday afternoon, gold was trading near session lows around $3,298, with the possibility of further downside before the day ends. The metal is testing an important support area that includes the 20-day moving average (currently at $3,307) and the top of a rising trend channel. Additional support lies just below, where intersecting trendlines and prior price levels converge between $3,275 and $3,269.
A sustained move below $3,275 would place gold beneath the short-term uptrend line and challenge the dynamic support provided by the 20-day moving average—both of which are key to maintaining bullish structure.
Recovery Above 20-Day MA Could Restore Positive Sentiment
A swift rebound above the 20-day moving average could signal the end of this minor pullback and restore bullish momentum. Conversely, a failure to hold above $3,275 could increase the likelihood of a deeper retracement and possibly signal the breakdown of the bull flag.
Still, an alternative interpretation suggests a bullish wedge pattern may be emerging in place of the flag. Both patterns are considered continuation formations, although they imply different retracement behavior before confirming a trend extension.
Trend Outlook Remains Positive
Despite Thursday’s pullback, the broader trend remains bullish. The recent dip is seen as a healthy retracement within a larger uptrend structure. If the breakout holds and sentiment improves, gold may resume its climb toward new highs, potentially surpassing the previous record of $3,500.
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