Gold breaks key resistance. Could this be the start of the next leg higher?

Gold has caught a strong bid this week as the macro backdrop that pressured the metal during the war could be unwinding. Spot pushed back above $4,700 on Wednesday after Axios reported that Washington and Tehran are circling a one-page memorandum to halt the conflict and reopen the Strait of Hormuz, the closest the parties have been to a deal since the war began. Trump also paused the US-led effort to escort vessels through the strait, citing progress in talks.

The reaction was immediate across the board. Brent crude fell roughly 7% in a single session to near $102, the dollar slid to its lowest reading since early March, and 10-year Treasury yields compressed by around 7 basis points. That combination could be viewed as the reverse of the chain that drove the metal lower during the conflict, which we covered in our last gold article on 24 April: war escalation pushed oil higher, fuelled inflation fears, kept the Fed hawkish, and lifted the dollar and yields, weighing on a non-yielding asset like gold.

With that pressure appearing to ease, gold has broken back above a key resistance area. The question is whether this could be the start of a more sustained move higher, or just a short-term reaction within the broader range.

Key takeaways

• Gold has broken above the $4,650 area with a strong bullish candle, re-entering the previous range that was broken to the downside on 28 April
• The metal is now testing the range EQ around $4,750 as the immediate resistance
• A reclaim of the range EQ could potentially open the door to the range highs near $4,850 and challenge the broader bearish structure
• On the 4-hour chart, a double bottom pattern has formed with confluence from a descending trendline, and the Accumulation/Distribution indicator broke out ahead of price
• Price is consolidating between roughly $4,640 and $4,740 in the near term, with the range break in either direction potentially setting the next directional leg

Daily chart

Gold testing the range EQ around $4,750 as resistance after re-entering the previous range with Wednesday’s bullish candle.

The daily chart shows a strong bullish candle on Wednesday that broke above the $4,650 area, putting price back inside the previous range that was broken to the downside on 28 April. Price is now testing the range EQ around $4,750 as resistance.

This area is significant for the broader structure:

• A clean reclaim of the $4,750 range EQ could potentially set up a continuation into the range highs near $4,850
• A break above the range highs could potentially break the bearish structure that has defined gold over the past several months, marked by a sequence of lower highs and lower lows
• A failure here could put the $4,640 area back into focus as immediate support

The way gold trades inside this range over the coming sessions could be telling for the longer-term picture. A full range resolution to the upside could potentially mark the start of a structural shift, while a rejection could keep the existing downtrend intact.

4-hour chart

Double bottom breakout on the 4-hour chart with confluence from a descending trendline, with price now consolidating between $4,640 and $4,740.

The 4-hour chart shows a clear double bottom pattern, with the range lows acting as the neckline resistance. There was also a descending trendline in confluence at the breakout point, adding to the technical significance of the move.

A few additional points stand out:

• The Accumulation/Distribution indicator broke out ahead of the price breakout, which could potentially point to underlying buying interest
• Price is now consolidating between the range lows around $4,640 and the range highs around $4,740
• A loss of $4,640 could be a bearish development and potentially shift the structure back to the downside
• A reclaim of $4,740 could open the door to the $4,850 range highs

This is a key area for gold. A clean break of the $4,740 resistance could potentially be the start of a more sustained move and a challenge to the higher-timeframe downtrend that has been in place for several months.

What to watch

• $4,640 as the immediate support. Holding this area could potentially keep the breakout structure intact
• $4,740 as the immediate resistance. A clean reclaim could potentially open the path to $4,850
• $4,850 as the major resistance and the upper boundary of the previous range
• NFP on Friday 8 May, with consensus around 60K. A weaker print could potentially extend the dollar and yield decline that has supported gold this week, while a stronger print could potentially do the opposite
• Iran-US negotiations, with any progress or breakdown likely to feed back into oil, the dollar, and gold simultaneously

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