Key Takeaways
- Gold hit another record high on Wednesday as investors look to traditional safe havens amid uncertainty about tariffs and the health of the economy.
- An intraday reversal on Tuesday formed a shooting star, a candlestick pattern that signals a potential bearish reversal.
- Bars pattern analysis projects a consolidation phase before the commodity resumes its uptrend later this month, potentially moving to around $3,395 by late May.
- Investors should watch crucial support levels on gold’s chart around $3,048, $2,953 and $2,858.
Gold (XAUUSD) hit another record high Wednesday as the precious metal extends a multi-month rally.
The commodity, which surged about 20% in the first quarter, remains well bid amid a flight to safety in response to uncertainty surrounding the Trump administration’s unpredictable tariff policy, which some analysts caution could reignite inflation and slow economic growth.
Strategists at Bank of America recently released a research note pointing out that the yellow metal will continue to see increased demand this year from central bank buying, ongoing appetite from retail investors and a rule change that allows China’s insurance industry to invest in gold for the first time.
Below, we take a closer look at gold’s chart and use technical analysis to identify crucial price levels that investors may be watching.
Shooting Star Pattern Emerges
An intraday turnaround on Tuesday formed a shooting star, a candlestick pattern that signals a potential bearish reversal.
It’s worth noting that a similar shooting star pattern emerged on gold’s chart in early February, preceding a month-long consolidation phase before the precious metal resumed its uptrend.
Meanwhile, the relative strength index (RSI) confirms bullish price momentum with a reading above the 70 threshold. However, the indicator sits in overbought territory, raising the possibility for short-term profit-taking.
Let’s apply bars pattern analysis to project where gold’s price may be headed next and also identify three crucial support levels worth watching during retracements.
Bars Pattern Analysis
Investors can use bars pattern analysis to predict where gold’s price may be headed next by analyzing prior trends on the chart.
When applying the technique, we take the bars comprising the price action between the two shooting star patterns and overlay them from Tuesday’s closing price. The analysis forecasts another consolidation phase before the commodity resumes its uptrend later this month, potential moving to around $3,395 by late May.
Crucial Support Levels to Watch
Profit-taking in the commodity could see an initial move down to the $3,048 level, a location on the chart where the price may encounter support near last month’s pre-pullback peak.
Bullion bulls’ inability to defend this level could trigger a decline to around $2,953. This region, currently just above the upward sloping 50-day moving average, may attract buying interest near the precious metal’s February swing high.
Finally, a deeper downturn in the commodity’s price opens the door for a move to lower support at $2,858. Investors may look to accumulate gold in this location near the late-February retracement low.
The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more info.
As of the date this article was written, the author does not own any of the above securities.