Gold (XAU/USD) Price Forecast: Bear Flag Suggests Downside Risk Remains

Bounce Forms Inside Day

Gold bounced from Tuesday’s low on Wednesday, reaching a high of $3,990. At the time of writing, trading holds near the day’s highs and could push higher before the close. With a low of $3,930, today’s price action is set to complete a green inside day.

Downward Pressure Persists

Today marks the third consecutive day of lower daily highs, signaling continued downward pressure. Key dynamic resistance is the 10-day moving average at $4,005. Its position relative to this week’s highs shows gold weakening, as today’s high sits further below the line. Unless there is a sustained advance above Tuesday’s high of $4,006, price behavior suggests further tests of support and the potential for a break below the recent swing low of $3,886.

Bear Flag Confirmation

Yesterday, gold broke down from a bear flag pattern, closing below the lower boundary line to confirm the breakdown. Bearish follow-through would be signaled on a drop below Tuesday’s low. The next lower target would then be the recent swing low, followed by a potential support zone near the confluence of the 50-day average, now at $4,856 and rising, and a 50% retracement level at $3,846. If that zone fails to attract buyers, a drop through could see gold fall toward the 61.8% Fibonacci retracement at $3,720. Note the centerline of a rising trend channel as well — support could emerge in its region.

Long-Term Support

The lower end of the bearish retracement is anticipated around the 50-day average since it has not been tested as support since reclaimed in August and the 20-day has failed. Typically, the first pullback to the 50-day line will show some signs of support even if it doesn’t lead to a bullish reversal. Even if the 50-day is breached, the centerline may represent a price zone for support.

Channel Dynamics

Recently the 200-day average started to rise above the bottom channel line begun from the February lows. Since it is rising, it should stay around or above the line and presents further confirmation of potential support at the lower end of the channel.

Outlook

The breakout above $4,006 is key to shift momentum — above it tests resistance at the 20-day average, below risks $3,886. The bear flag and 10-day rejection favor sellers. If sellers persist the 50-day average support keeps the trend, while a break eyes $3,720. Today’s bounce, although showing gains, needs to lead to a breakout above $4,006 before there is confidence that buyers can sustain control.

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