Key Takeaways:
- Gold is likely to close weak on both daily and weekly charts, signaling a potential deeper retracement.
- A bearish shooting star candlestick pattern may form if gold fails to rally before the week’s close.
- Initial retracement levels to watch for support include the 38.2% Fibonacci retracement at 2,282 and the 50% retracement at 2,256.
- The RSI momentum oscillator shows a double top formation and is retreating from overbought levels, indicating a potential correction.
- A decline to test support around the 20-Day MA at 2,249 may be expected once the short-term 8-Day MA is broken.
Weak Close is Likely Clue for a Deeper Retracement
Gold is on track to close weak on both daily and weekly charts, potentially signaling a deeper retracement. A bearish shooting star candlestick pattern may form if gold fails to rally before the close of the week, with a weekly bearish signal triggered on a drop below this week’s low of 2,303. A break below this level would also mean that the short-term 8-Day MA has been breached.
Initial Retracement Levels
In the event of a bearish retracement, potential support levels to watch for include the 38.2% Fibonacci retracement at 2,282 and the 50% retracement at 2,256. Given gold’s significant rally of 22.5% from the February low, a quick recovery from a retracement may not be immediate.
Correction Could See Test of 20-Day MA
The relative strength index (RSI) momentum oscillator has formed a double top and is now retreating from overbought conditions, suggesting a potential correction. A decline to test support around the 20-Day MA at 2,249 may be in store once the 8-Day MA is broken. While today’s price action does not alter the long-term bullish outlook for gold, profit-taking could lead to a retracement as short-term demand weakens.