Gold (XAU/USD) Price Forecast: Undercut Setup Signals Potential Bottom

Support Confluence Under Pressure

Gold dipped to a new corrective low of $4,024 during Thursday’s session, after failing to find support near the March swing low of $4,098. However, gold has reached an area of support confluence, suggesting it may be close to a potential bottom. The support zone is validated by the March swing low, the 61.8% Fibonacci retracement of the long-term upswing near $4,067, based on the move from the May 2025 swing low, an uptrend line, and the initial 100% projected target for a falling ABCD pattern. Further, current levels also align with a small basing consolidation pattern from November 2025.

Reversal Conditions Begin to Emerge

Together, these indicators suggest that gold is in a zone where a reversal could develop, but it is not yet clear whether there will be further testing of support before that occurs. Nevertheless, Thursday’s price action shows a potential “undercut-and-run” setup. This is where sellers are control earlier in the session, as a key support zone fails and a new trend low is reached. But instead of continuing to fall, signs of an intraday reversal occur instead. Buyers take back control for an intraday rally that closes with a gain and above the prior low. In other words, the bearish signal is not confirmed and instead negated.

Trigger Levels and Market Response

Therefore, a one-day bullish reversal in gold triggers with a move above Thursday’s high of $4,220, supported by the failed breakdown. Failed patterns can lead to sharp moves in the opposite direction and that is what the “undercut-and-run” setup seeks to capture – the potential flip from sellers being in control to buyers taking control near a key pivot zone. However, this is an advanced entry technique for experienced market participants. Even though there is a one-day bounce from the new trend low of $4,024, support may still be further tested near current lows and the uptrend line.

Lower Support Risk Scenario

If gold falls below the uptrend line, the next lower target zone is around $3,929 to $3,873, consisting of prior support and the 127.2% projected target for the ABCD pattern.

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