Is XAUUSD gearing up for a reversal?
Watch the video below to see my thoughts on where gold could be going from here.
Don’t forget to scroll down for more commentary and an annotated chart.
Gold buyers have been relentless.
In the last thirteen months, XAUUSD has rallied from 1160 in August 2018 to a year-to-date high of 1557 this month.
It’s been an impressive move, to say the least.
But nothing lasts forever, and at some point, gold is going to need a healthy pullback.
The tricky part is trying to time such a pullback.
It’s easy to say that one will happen eventually. Trying to time it, on the other hand, is much more difficult.
This is where technical patterns and levels can help.
In fact, a well-defined reversal pattern is one of the simplest and most reliable ways to spot an upcoming pullback.
And the XAUUSD may be forming such a pattern.
There are no guarantees, but the price action since August 7 is starting to look like a potential head and shoulders pattern.
The key words there are “starting” and “potential”.
Gold is still in rally mode, and until the market breaks the support level near 1490, buyers are in control.
But the potential for a reversal is real, in my opinion.
XAUUSD has yet to experience a significant pullback since the rally began thirteen months ago.
That alone would leave me hesitant to buy gold at these lofty prices.
As always, though, I have some key levels in mind that would either confirm or negate the potential for a reversal.
Let’s start with what it would take to negate the head and shoulders.
A move above the year-to-date high at 1557 would cancel out the potential for a move lower, at least in the short term.
I also think a close above the 1530/40 resistance area would suggest strength and could also hint at the next leg higher.
Now, what would confirm a bearish reversal for XAUUSD?
A daily close below neckline support that extends from the August 13 low would attract sellers.
Remember that I use New York close charts so that each 24-hour session opens and closes at 5 pm EST.
It would also confirm the head and shoulders pattern below.
A close below the neckline near 1490 would open the door to 1450 support followed by 1410.
The latter, by the way, would be the measured objective.
But as of right now, gold bulls are in control. I can’t stress that enough.
And if buyers do clear that 1530/40 resistance area on a daily closing basis, gold could be on its way to retest the year-to-date high at 1557.