Gold Price Forecast: Eyes Key Reversal as Weekly Pattern Develops

A key indication of the strength or weakness of gold may be established tomorrow, as the weekly period will be complete. Currently, the week is shaping up as a potentially bearish shooting star candlestick pattern. It shows signs of a bearish reversal within one week, as sellers subsequently took charge following a new record high of $3,500. But the pattern is only valid once there is a breakdown below this week’s low, which is now at $3,260.

A bearish reversal of the weekly shooting start pattern would follow a one-day bearish reversal of a shooting star that triggered on Wednesday. The daily shooting star pattern occurred on the new record high day. So far, the decline from that high found support at a four-day low of $3,260 on Wednesday. On Thursday, today, gold traded inside the prior day’s range with a low of $3,287 and a high of $3,368.

Bullish Momentum Unsustainable

Technically, there has been limited damage done to the bull trend so far, but there are initial signs that at least an interim high may have been reached and therefore a deeper or longer correction may have begun. The recent rapid rise in the slope of the trend is one example of how the gold rally may have reached exhaustion now that a one-day bearish signal has been confirmed. Trend indicators such as rising support trendlines and the increasing spread between the 200-Day MA (blue), 50-Day MA (orange), and 20-Day MA (purple), reflect the growing bullish momentum.

Bearish Signs Remain

A decline below today’s low of $3,287 will give a bearish signal and put this week’s low at risk of failing. However, the first key support zone looks to be from $3,246 to $3,228, consisting of a prior trend high and 50% retracement, respectively. The top blue rising trend channel line previously represented resistance and now support since it was exceeded two weeks ago is also around that price area. Subsequently, a decline below the 50% retracement level puts gold in a position to test the next lower potential support zone around a prior trend high and 61.8% Fibonacci retracement level at $3,164.

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