Heads up, gold bugs!
I’m seeing a potential reversal brewing on the hourly chart of the precious metal.
XAU/USD has formed a head and shoulders pattern on the short-term time frame and the commodity price is currently testing the neckline.
Do you think a break below this support level is due?
Gold (XAU/USD) 1-hour Chart by TV
Gold has been on a tear in the last couple of weeks of December, but it seems that the rally is fizzling out lately.
Has the precious metal been taking cues from its fellow safe-havens? And can the risk-on flows keep forcing gold to retreat in the near-term?
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Technical indicators still seem to be hinting at a continuation of the climb, as the 100 SMA is above the 200 SMA while Stochastic might pull higher from the oversold region soon.
I’m also spotting a bit of bullish divergence, as price made lower lows while the oscillator seems to be making higher lows. Are buyers about to take over soon?
If that’s the case, watch out for a move back to the areas of interest at the pivot point level ($2,063.34) and R1 ($2,083.28) near the previous week highs.
On the other hand, if gold falls through the neckline near the 200 SMA dynamic inflection point, a selloff of the same height as the chart formation might follow.
If that happens, keep an eye out for a move to the next downside targets at S1 ($2,047.93) then S2 ($2,032.89) that lines up with an area of interest or former resistance zone.
Good luck and good trading this one!