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Gold (XAUUSD) is starting to look top-heavy.
In fact, it’s looked that way for some time, in my opinion.
I wrote about this ascending channel on September 10.
More specifically, I mentioned that a close below the confluence of support at 1480 would put the rally at risk.
We never did get that breakdown, though.
But then again, buyers have struggled to gain ground above 1500.
Watch Sunday’s video to see why.
Fast forward a few days later, and gold is at risk of closing below channel support although horizontal support at 1480 is still intact.
Still, this could be the start of a much-needed pullback for XAUUSD.
After all, this market hasn’t seen a healthy pullback since April.
And even that was a relatively shallow retracement.
The price action between late June and July certainly doesn’t qualify as a pullback given that XAUUSD was still carving higher highs and higher lows.
My point here is that a pullback wouldn’t be a bad thing for gold, nor would it negate the longer-term rally.
It also shouldn’t be a surprise given the gains we’ve seen since gold broke out in late May.
Just keep in mind that sellers still need to get through 1480 support.
If they do, I think a decline to 1450 is likely.
In fact, a pullback to 1410 or so is my base case if gold closes below 1480 support over the coming sessions.
That 1410 level served as support in late June and early August and is also the 50% retracement of the year-to-date range.
As for resistance, I suspect sellers will try to keep prices below 1500.
That’s the former channel support (new resistance) from the May 30 low.
A daily close back above that level would be indicative of a false break and re-expose the 1525 region.