Key Takeaways
- Gold reached another record high on Tuesday as investors looked to traditional safe havens in the face of uncertainty over tariffs and the state of the economy.
- A possible bearish reversal is signaled by a shooting-star candlestick pattern formed on Tuesday.
- Bars pattern analysis predicts that the commodity will enter a consolidation phase, before it resumes its upward trend later this month. It could reach around $3,395 in late May.
- Investors should watch crucial support levels on gold's chart around $3,048, $2,953 and $2,858.
Gold (XAUUSD), the precious metal, has reached another record high on Wednesday. The precious metal is continuing its multi-month rally.
The commodity remains well bid despite the fact that it surged around 20% in the quarter. This is due to a flight of safety as a result of the uncertainty surrounding Trump’s unpredictable policy on tariffs, which, according to some analysts, could reignite inflation or slow economic growth.
Bank of America’s strategists released a recent research note that pointed out that yellow metal demand will continue to increase this year, due to central banks buying it, continued interest from retail investors, and a new rule that allows China’s Insurance Industry to invest in Gold for the first time.
Below, we examine the gold chart in more detail and use technical analysis techniques to identify price levels that are important for investors.
Shooting Star Pattern Emerges
A shooting star candlestick pattern was formed by an intraday turnaround on the Tuesday. This pattern signals a potential bearish turn.
It’s interesting to note that in early February a similar shooting-star pattern appeared on gold’s charts, preceding a consolidation phase lasting a full month before the precious material resumed its upward trend.
The relative strength (RSI) confirms a bullish trend with a reading that is above the 70-point threshold. The indicator is in overbought land, which raises the possibility of short-term profit taking.
We can use the bars pattern analysis to predict where gold may be headed in the future. We can also identify three important support levels that are worth watching during retracements.
Bars Pattern Analysis
Investors can predict gold’s future price using bars pattern analysis by analyzing past trends on the graph.
The technique involves overlaying the price bars between the two shooting stars patterns with the Tuesday closing price. The analysis predicts that the commodity will undergo another consolidation phase, before it resumes its upward trend later this month. It could move to around $3 395 by late May.
Keep an eye on the Support Levels Crucial
Profit-taking may cause the commodity to move initially down to the $3.048 level. This is the location on the graph where the price could find support near last months’ pre-pullback high.
Bullion bulls failing to defend this price could cause a decline down to $2,953. This region, which is just above the upward-sloping 50 day moving average, could attract interest from buyers near the precious metal’s swing high in February.
A further decline in the commodity price could lead to a move toward lower support, which is $2,858. Investors could accumulate gold near the low of the retracement in late February.
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As of the date of this article, the author did not own any securities listed above.
