Following a new record high for gold of $3,500 on Tuesday, the precious metal showed signs of profit taking and the potential for a possible temporary top. Sellers took control following the new record high and remained in charge at the time of this writing. Trading continues near the lows of the day, which is currently $3,368.
Gold Price Forecast
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See all Gold forecastsIf the session closes with gold in a similar position, a potential bearish shooting star candlestick pattern will be formed. And it will be established at the potential target for a rising ABCD pattern projected by 161.8%. In other words, the CD leg of the advance was 161.8% of the AB upswing at $3,498.
Signs of Short-Term Exhaustion
Signs have been building recently that the uptrend was getting extended with the risk of a bearish pullback increasing. Nonetheless, the price of gold proceeded higher as global uncertainty spread, busting through numerous potential resistance levels on the way up. Recently, upside breakouts of two rising parallel trend channels triggered and were confirmed by weekly closing prices above the top of each channel. This was bullish behavior but also signs of growing speculation as traders jump into gold in fear of losing out on further gains.
Generates Bearish Shooting Star
Today’s bearish shooting star candlestick pattern will trigger a one-day bearish reversal on a drop below today’s low, currently at $3,372. The first clear downside target is the prior brief trend high at $3,246, which was also the top of a small bull pennant pattern that covered only two days. Measuring the pattern provided an estimated target of $3,454, and it was exceeded today. Also, on the way down watch for support around the top channel lines. The price they represent will vary depending on when approached.
Test of 20-Day Moving Average Possible
Since the 20-Day MA was reclaimed at the beginning of this year, two subsequent pullbacks to test the line as support failed initially before gold recovered and trended higher. This current potential bearish pullback could certainly fall to the 20-Day line, now at $3,153, to test it as support before it is complete. If that is what happens the expectation is for signs of support to be seen around the line. Since the 20-Day MA is rising it may reach another prior trend high of $3,168, where support may be seen, or rise above it.
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