Gold Bulls in Trouble as Bearish Breakout Pattern Emerges

Gold Bulls in Trouble as Bearish Breakout Pattern Emerges

Gold (XAU/USD) traded without any strong directional bias and remained in a tight range near $1930 in the early European session on Wednesday.

Yesterday’s decline was met with strong support at the $1906 line (the 50 SMA on the daily chart), where it was able to facilitate a modest bounce. The bounce was likely as a result of the fresh flight to safety amid a strong sell-off in the US stock markets.

With the global Coronavirus cases still increasing and lingering doubts over a strong US economic recovery in the near-term, AstraZeneca’s recent halt of its Coronavirus vaccine testing spurred panic in investors. This, consequently, bolstered demand for safe-haven assets, including gold.

The global risk sentiment was further disrupted by the renewed risk of a no-deal Brexit. Worries erupted after the U.K. Prime Minister Boris Johnson threatened to abandon the Brexit talks if a deal was not agreed on by mid-October.

However, a decent uptick in the US equity futures ensured that the yellow metal stayed beaten-down. Additionally, steady buying interest for the US dollar (DXY) limited further gains for the dollar-denominated commodity, which has kept it range-bound on early Wednesday.

XAUUSD – Daily Chart

Gold (XAU) Value Forecast — September 9

XAU/USD Major Bias: Bearish

Supply Levels: $1940, $1960, and $1983

Demand Levels: $1923, $1906, and $1900

Based on an indication from our chart, gold is on the verge of a strong breakout to the downside. On the daily chart, we can see that a triangle pattern has emerged, which is usually indicative of a breakout. However, given gold’s consistent failure to climb above the upward-facing line, a bearish breakout could occur as bulls have run out of steam.

That said, strong support remains at $1906 (50 SMA). A break below that level could open gold up to the upper-$1800 levels.

On the flip side, a sustained move above the $1940-45 resistance area could ease the bearish pressure significantly.

Note: Learn2.Trade is not a financial advisor. Do your research before investing your funds in any financial asset or presented product or event. We are not responsible for your investing results

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