- A wedge pattern on the 4-hour chart hints at a potential reversal to 1,900.
- Gold sends mixed signals ahead of the new week’s trading; a rally to 2,000 is possible.
Gold spiked significantly this week and brushed shoulders with 1,960. The instability witnessed in the stock market saw the precious metal used as a hedging asset. The rally to 1,960 was a continuation of the uptrend started towards the end of October. The days heading to the US election shined a light on the gold, catapulting it to nee monthly levels.
XAU/USD closed the week changing hands at 1,952 after embracing support at 1,950. Gold’s immediate upside is capped by the seller congestion at 1,950. Consequently, the formation of a descending channel adds credulity to the bearish narrative. Therefore, it is likely for the precious metal to crumble in the coming week, especially if the wedge pattern support and the short-term anchor at 1,940 caves in.
On the downside, the initial point of contact could be the 50 Simple Moving Average in the-hour chart. Other tentative support areas include the 100 SMA and the 200 SMA at 1,900.
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XAU/USD 4-hour chart
If instability spikes in the stock market following Joe Biden’s win, gold could resume the uptrend abolishing the bearish outlook altogether. Moreover, holding the short-term support at 1,950 would allow bulls to shift the focus back to 2,000. However, the seller congestion 1,960 might absorb the buying pressure, delaying the price movement.