Market News & Analysis

Top Story

Gold Rolling Over – What Are the Next Key Support Levels to Watch?

As my colleague Matt Simpson noted last week, “the daily trend [in gold] remains bullish above $1480,” but as US traders sit down at their desks for the first day of the trading week, that key support level is at risk of breaking.

Looking at the chart below, gold’s uptrend has lost momentum over the last six weeks, with prices unable to make much progress through the mid-$1500s. Over that period, the yellow metal has gone from putting in higher highs and higher lows to lower highs and lower lows, creating a textbook “head-and-shoulders” pattern. This pattern shows a shift from a bullish to a bearish trend and is often seen at important tops in the market:

Source: TradingView, City Index

Meanwhile, the RSI indicator is in a bearish channel, and the MACD is trending lower below its signal line and about to cross the “0” level. In other words, the secondary indicators are confirming the price reversal, suggesting that bears may be taking the upper hand.

In a mirror image of Matt’s comments last week, the short-term trend has now shifted to bearish as long as gold remains below its head-and-shoulders pattern “neckline” in the $1480-1485 area. To the downside, bears may look to target the Fibonacci retracements of this summer’s rally starting at $1445 (38.2%), $1411 (50%), and $1377 (61.8%), as well as the “measured move” projection of the head-and-shoulders pattern at $1400.

Of course, traders must also consider the fundamental outlook for the yellow metal. With global interest rates still at depressed levels and several geopolitical hotspots still at risk of a significant disruption, bears should be cognizant of the risk of a bullish reversal near these key support levels.


Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.