Gold (XAU/USD) Price Forecast: Support Test Could Shape Next Major Move

Critical Support Faces Its Biggest Test

Gold ends the week at a pivotal short-term support zone, with downside risk increasing if buyers fail to defend it. The weekly chart tells the story. The high for the week was $4,382, which completed the first pullback to test prior support as new resistance following the bearish breakdown from the week before.

Resistance was seen near prior price structure and the 20-day moving average. Subsequently, sellers took back control and gold weakened into the week’s close. Given the U.S. holiday, gold futures closed early on Friday. As a result, the market enters the new week at a critical inflection point, with this support zone likely to determine the next significant move.

Moreover, the period ended with gold at its lowest weekly closing price of the bearish correction at $4,161, while the low for the week was $4,122. The weekly candle formed an inverted hammer candlestick pattern. It reflects a failed attempt to move higher earlier in the week before closing near the week’s lows, a sign that sellers remained in control into the close. Also, this was the second consecutive week that gold closed below the 50-week moving average at $4,261, providing further confirmation that the trend continues to weaken. The 50-week moving average now takes on increased importance as dynamic trend resistance.

Decision Zone Could Spark Reversal

Despite the potential for a bearish continuation, the next decision zone lies near the 78.6% Fibonacci retracement of the prior short-term advance at $4,102. If buyers respond positively there, signs of strength could emerge, leading to another bounce to test resistance. That would establish a new higher swing low and thereby create the potential for a double bottom pattern. An advance above this week’s high would trigger the reversal pattern.

Resistance Levels to Watch

However, the first area of resistance is marked by the 20-day moving average, currently near $4,356 and falling, since it was recently confirmed as dynamic resistance. After that, this week’s high at $4,382, which marks a lower swing high on the daily chart, is the next key structure resistance. A rally above that level would then target the 200-day moving average, currently around $4,468.

Breakdown Would Shift Focus Lower

Alternatively, if the current support zone fails, the trend low of $4,023 will come at risk of being broken. Nonetheless, gold would then be approaching another potentially significant support area, highlighted by the recent bullish reaction and the confluence of several technical indicators. Most importantly, a long-term uptrend line currently converges near $4,000. Whether buyers step in there or support fails altogether should help determine if this correction is nearing completion or has further room to extend lower.

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