Decision Zone Could Spark Reversal

Despite the potential for a bearish continuation, the next decision zone lies near the 78.6% Fibonacci retracement of the prior short-term advance at $4,102. If buyers respond positively there, signs of strength could emerge, leading to another bounce to test resistance. That would establish a new higher swing low and thereby create the potential for a double bottom pattern. An advance above this week’s high would trigger the reversal pattern.

Resistance Levels to Watch

However, the first area of resistance is marked by the 20-day moving average, currently near $4,356 and falling, since it was recently confirmed as dynamic resistance. After that, this week’s high at $4,382, which marks a lower swing high on the daily chart, is the next key structure resistance. A rally above that level would then target the 200-day moving average, currently around $4,468.

Breakdown Would Shift Focus Lower

Alternatively, if the current support zone fails, the trend low of $4,023 will come at risk of being broken. Nonetheless, gold would then be approaching another potentially significant support area, highlighted by the recent bullish reaction and the confluence of several technical indicators. Most importantly, a long-term uptrend line currently converges near $4,000. Whether buyers step in there or support fails altogether should help determine if this correction is nearing completion or has further room to extend lower.

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