Gold gained some positive traction on Thursday, but lacked any strong follow-through push to the upside. A softer risk tone, sliding US bond yields, and weaker USD extended some support to the metal. The lack of strong follow-through warrants some caution before placing fresh bullish bets.
Gold prices appear to have embarked on a bearish consolidative phase following Monday's sharp sell-off. That said, support has emerged around $1,858 per ounce while the topside looks capped around the $1,960 level.
Gold: Key resistance and support
The recovery attempts for gold remain capped below strong resistance at $1,888 which coincides with the previous week low. Breakthrough above that level could open doorways towards the next critical hurdle placed at $1909, which is convergence of resistance and Fibonacci 50% .
Alternatively, a break below $1,858 level could expose the September low of $1,850. Given that yellow metal is pressured, a further downtrend is likely with the formation of a bearish pennant.
These are the key things to note:
- A bearish pennant pattern has to be preceded by a strong down move that resembles a flagpole, characterized by the continuation of the upward or downward trend.
- Form a shallow retracement (typically less than 38% of the flagpole).
