Resistance Caps Advance, Bearish Signal Emerges
Gold remained constrained below resistance near the 100-day moving average on Friday, trading within a range similar to Thursday’s session. The 100-day moving average capped the advance this week with a high of $4,603 reached on Wednesday. That high, now identified as a lower swing high, also completed a 38.2% Fibonacci retracement before closing with a bearish shooting star candlestick, which subsequently triggered to the downside the following day.
Confluence Zone Reinforces Selling Pressure
The significance of this week’s high as resistance is enhanced by the confluence of several indicators defining a resistance zone. These include the upper boundary of a large rising trend channel, prior resistance from a previous trend high at $4,550, and the falling 10-day moving average, currently near $4,624. Taken together, the behavior of price near resistance suggests persistent downward pressure, indicating that lower prices may again be tested as support.
Monthly Reversal Signals Shift in Momentum
Selling pressure is also evident on the monthly chart, which has triggered a bearish reversal on that timeframe for the first time in 24 months. Moreover, March is on track to complete a bearish monthly engulfing pattern, where the body of March engulfs the candle body from February. Following an upside breakout in March 2024, there has only been one month with a lower low than the prior month. That previously confirmed a strong bull trend on the long-term timeframe, while the emerging monthly reversal signal in March indicates that momentum may be shifting.
Key Moving Averages Define Support Zone
It is notable that the March low of $4,099 found support near the 10-month moving average. That was the first time it was tested since the bull trend began in March 2024. This reinforces potential support near this month’s low, which also aligned with support near the 200-day moving average during the March decline.
Downside Risk Persists Below Key Breakout Level
Short-term downward pressure will likely persist in gold unless there is a decisive advance above this week’s high of $4,603. Such a move could lead to an upside continuation towards resistance near the 20-day moving average, now at $4,880 and falling. Otherwise, sellers may maintain control and drive a retest of support near the 61.8% Fibonacci retracement of the small recent upswing or the 78.6% Fibonacci retracement near $4,206.
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