Are gold bulls having a hard time keeping the precious metal up these days?
This is a classic reversal pattern that I watch on the 4-hour time frame.
Gold (XAU/USD) 4 hours Chart by TradingView
Gold made several failed attempts to break its July highs around the $2,475 area, only to fall back to the area of interest near $2,375 to form a double top pattern.
Recession fears appear to be haunting investors again these days, with back-to-back misses in top-tier US data sparking some risk-off flows in recent trading sessions.
The XAU/USD pair has yet to test and break the neckline support level to confirm a potential reversal from the upside, as the dynamic inflection point of the 200 SMA at S1 ($2,382.18) seems to be keeping losses under control for now.
Is the support area likely to hold again?
Remember that directional biases and volatility in market prices are usually driven by fundamental factors. If you haven’t done your homework on gold and market sentiment, it’s time to take a look at the economic calendar and stay up to date with daily fundamental news!
Riskier assets like commodities remain weak, although the market panic seems to have abated for now. Be prepared for another wave of volatility that could be enough to trigger a neckline breakdown and sell gold at the same height as the chart formation.
On the other hand, continued risk-on sentiment amid a recovery in US equity markets or a fresh batch of positive global data could be enough to stabilize prices, potentially keeping gold on track for a rebound to its highs near R1 ($2,490.26).
Whichever way you decide to play with this setup, make sure to practice proper risk management techniques and stay up to date with the major market catalysts that are lining up!
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