Gold at key decision point following head and shoulders retest

For today’s update on gold we are going to revisit the daily time frame and then move into the 4H. On the daily chart, gold is currently retesting an untested breakout area around 3,250, marked as number two, with a descending trendline above acting as resistance, marked with number three. If price manages to hold above this support and reclaim the descending structure, we could potentially see the move we’ve been looking for, up towards the resistance level around 3,400, marked as number one.

Zooming into the 4-hour time frame, we see that gold has recently completed a textbook head and shoulders pattern. The breakdown of the neckline led to a swift drop into the support zone around 3,250, which corresponds to the same level marked as number two on the daily. Currently, price is testing the 3,290 area, marked as number one, which is the neckline of the pattern.

This is an important moment, as many traders who follow this pattern would typically look to either enter on the breakdown or on the neckline retest, which is what we are seeing now. For the bullish structure observed on the daily to hold, the 4-hour chart needs to reclaim the neckline level at 3,290, break above the descending trendline marked as number four, and preferably also get above the right shoulder of the pattern at 3,325, marked with number three.

A failure to reclaim the neckline would be a sign of local weakness and could lead to further downside movement. Overall, gold is at a critical decision point and we will continue monitoring these levels closely in upcoming updates.

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