Is gold about to retreat from its rallies soon?
I’m seeing a reversal pattern that looks ready to play out on its 4-hour chart!
Right now, the precious metal is still hovering above the neckline support. If it breaks, how low do you think XAU/USD might go?
Gold (XAU/USD): 4-hour
After a couple of failed attempts to bust through the $2,040 resistance zone, gold is back down to testing the double top neckline at $1,960.
A break below this support zone could send the precious metal lower by the same height as the chart formation or roughly $80.
Moving averages seem to be in favor of a descent, as the gap between the indicators has narrowed enough to point to a possible bearish crossover. At the same time, XAU/USD is trading below both SMAs, so these could hold as dynamic resistance levels.
Stochastic has some room to head lower before reflecting oversold conditions or exhaustion among sellers.
However, if the oscillator starts pulling higher, gold bugs might still return and allow another bounce back up to the nearby area of interest at $2,000.
I’d keep an eye out for updates on the U.S. debt ceiling negotiations, as these seem to be influencing dollar price action and overall market sentiment lately.
Any hints of a resolution could convince dollar bulls to charge while more signs of discord could highlight the safe-haven appeal of gold.
