Gold prices have recently broken out of a short-term bearish technical pattern, indicating the potential for the yellow metal to surpass its previous all-time highs, according to James Stanley, Senior Strategist at Forex.com.
“Last week, gold prices broke out of a falling wedge pattern significantly,” Stanley wrote. “As April began, gold prices were soaring, eventually pushing the weekly RSI into overbought territory.”
Stanley noted that gold’s failure to sustain above $2,400 per ounce led to a sharp $100 pullback.
“But just as gold bulls couldn’t maintain levels above $2,400, gold bears found it difficult to sustain below $2,300,” Stanley explained. “There was only one daily close below $2,300, but buyers quickly returned, holding support above this level and forming higher lows.”
Stanley described this price action as forming the falling wedge pattern on the daily chart. “Sellers were more aggressive at highs or near resistance but became passive near lows or at support,” he said.
Daily Gold Chart Price
Reflecting on this week’s price action, Stanley identified another technical pattern emerging from the pullback: “a Fibonacci retracement that has consistently shown key inflection points.”
“Using the April high and the May low, we get a 61.8% Fibonacci retracement at $2372.68,” he explained. “This level helped cap the highs on Friday before a pullback occurred.”
Stanley observed that the pullback reached the 38.2% retracement level. “This level is at $2336.31, which supported the lows on Monday and Tuesday, allowing bulls to return,” he noted. “This led to a rally and a pause at the 61.8% level, followed by an extension to the 76.4% retracement at $2395.18, which has held the highs so far this week.”
He further mentioned that the subsequent pullback “has maintained support on a retest of the prior resistance, aligning with the same 61.8% retracement at $2372.68.”
Gold Four-Hour Price Chart
Looking ahead, Stanley mentioned that “the big question is whether bulls can achieve a weekly close above the $2400 level,” a milestone XAU/USD has yet to reach.
“The two previous instances of price testing above that level resulted in rapid pullbacks, with the second test also forming a lower high,” he observed. “This context is important if continuation occurs, as gold bulls maintaining bids above this significant level would demonstrate a strong reaction to the pullback that began a month ago.”
Stanley highlighted that above the $2400 level, previous inflection points are at $2,417 and $2,431. Beyond these, there are no significant barriers preventing gold from reaching $2,500 per ounce.
Gold Weekly Price Chart
Stanley stated that if prices exceed the all-time high of $2431, projecting shorter-term resistance levels would be necessary. “This could highlight targets like $2450 or $2475 before considering a test of $2500,” he said.
Following the formation of a triple top pattern just below $2,400 around 9 pm EDT on Wednesday, gold prices have declined on Thursday. At the time of writing, spot gold was trading at $2,376.42, down 0.41% for the session.
