Gold Analysis: Technical Tuesday - November 26, 2024

Gold analysis: After the big sell-off on Monday, I will try to examine what this means for gold in terms of direction in the near-term outlook, purely from a technical point of view.

Technical gold analysis: Trend reversal or a mere pause?

The near-term direction of gold prices has turned bearish from a technical point of view after the metal sold off sharply on Monday, forming a large bearish engulfing candle on the daily chart. The selling started as prices encountered resistance exactly where one would have expected: the area around $2708 to $2725 (shaded in dark orange colour on the chart). This area had previously served as a key support level, then gave way when gold prices initially sold off on the election day. Now that prices have retested this zone, it has held firm as resistance, which is unsurprising. Whether or not this is a complete trend reversal, or a mere pause remains to be seen. It is far too early for that discussion. But what it means is that traders should take it from one level to the next until we have some more price action to work with. Remember, the long term trend is clearly still bullish and so we could just be in the middle of a long-overdue correction or consolidation phase.

Source: TradingView.com

Gold analysis: key levels to watch

Looking ahead, the key resistance area to monitor on the gold chart is now starting from $2643 to $2668, the latter marking the low from Friday's range, when it was engulfed by that sell-off on Monday. As long as prices remain below this area now, particularly $2668, the path of least resistance will be to the downside, chiefly following that bearish signal from Monday. However, if gold closes above $2668 on a daily basis, it would invalidate this bearish technical setup.

Focusing on the downside, the next potential support level, should the selling pressure persist, is at $2580. This level represents the base of a prior breakout from mid-November and holds considerable importance in the short-term outlook. If this support gives way, gold could dip into a longer-term support zone between $2500 and $2530, highlighted in blue on the chart. This zone had previously been a breakout area but has not yet been retested from above since that breakout occurred in the second week of September.

In a longer-term perspective, continued selling could bring the 200-day moving average and the $2400 support area into focus. However, those levels will be addressed if and when the market moves toward them. For now, the abovementioned levels are the critical levels shaping the short-term technical gold analysis.

Video: Gold analysis and insights on WTI and EUR/USD

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

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