FX.co ★ XAU/USD, GOLD

Market Structure Analysis The chart for Gold (XAU/USD) on the 1-hour timeframe reflects a market that has recently transitioned from a bullish phase into a corrective bearish structure. Earlier in the cycle, multiple Breaks of Structure (BOS) to the upside marked a strong bullish continuation, supported by rising volume and a series of higher highs and higher lows. However, as price reached the region around 4,250, momentum began to weaken, shown by repeated Market Structure Shifts (MSS) and failure to sustain higher highs. The candlesticks in the highlighted zones show long wicks and diminishing bullish volume, a sign of exhaustion and distribution. After forming a liquidity grab above the previous swing high, price sharply reversed, breaking below a key structural level and creating a bearish BOS. This confirms that smart money transitioned from accumulation to distribution, and sellers regained control. Recent candles show bearish follow-through as price trades below the most recent demand zone (shaded area), which has now been violated. The re-test of this broken demand turned supply zone also aligns with a balanced price range where inefficiency previously existed. Sellers appear to have used this area to refine entries, which is evident from the rejection wick and increased bearish volume. The market is now making lower highs and lower lows, indicating that bearish order flow is active. With volume rising during down moves and decreasing during upswings, the current structure clearly favors selling pressure. The dotted horizontal level near 4,198 serves as an important intra-day liquidity zone, and the current decline into this area suggests the possibility of a deeper sweep toward lower liquidity pools formed earlier in the week.

Trade Setup and Execution Plan Given the confirmed bearish market structure, the optimal trading approach is to look for short opportunities rather than attempting premature reversal trades. The ideal entry area has already been tapped — the gray supply zone created from the last bullish mitigation block before the downside BOS. If price retraces back into this zone, it would offer a high-probability short setup with a refined entry. Traders should watch for bearish candlestick confirmations such as rejections, engulfing patterns, or MSS within the supply zone to validate the continuation of bearish order flow. This zone represents institutional selling interest and aligns well with a premium price level within the current bearish leg. The first target for short positions should be the liquidity resting below the 4,180 region, where multiple equal lows provide a clear draw for smart money. If this level breaks with momentum, the next logical target lies near the mid-range level around 4,155, which previously acted as a consolidation floor and contains unmitigated demand. A deeper extension could reach 4,130 if bearish volume persists. For risk management, stops should be placed just above the supply zone or the last swing high, ensuring protection against false pullbacks. Traders should also monitor volume behavior: if bullish volume unexpectedly increases on a retracement, it may signal a temporary pause or deeper correction, requiring adjustments in trade sizing or timing. Overall, the market currently favors bearish continuation, and selling retracements into premium price zones presents the highest probability setup. Patience and precision are key waiting for price to return to supply, observing confirmation, and executing with disciplined risk management will provide the best opportunity to capitalize on the current market direction.