- Gold is looking towards a week of volatility, especially if the H&S pattern is left to play its role.
- If resistance at 1,740 remains in place, XAU/USD could fall back into the hands of the sellers.
The world’s most pressures metal is dealing with the formation of an inverted head-and-shoulders pattern. Looking back, a recovery towards the end of May from levels at 1,700 lost steam at 1,740 in the first week of June. Sellers griped the market more, forcing gold under 1,700. The monthly low at 1,670 marked the end of the lower leg, giving way for recovery.
XAU/USD recovery in the last seven days remained steady but stalled once again at 1,740 which formed the inverted H&S pattern. The precious metal closed the trading on Friday 1,730 amid consolidation. If the selling pressure toward 1,740 continues to prevail in the coming weeks, we can expect sellers to dominate the market, pulling gold back to 1,700.
The technical picture at the moment supports consolidation. However, the price is inclined towards making minor declines while narrowing towards the short term support areas at the 100 SMA, currently at 1,718.25 and the 50 SMA at 1,713.02. It is likely that consolidation could last longer, especially when the sidelong moving MACD is taken into account. All in all the impact of the H&S pattern cannot be ignored especially with the dollar gaining strength.
XAU/USD 4-hour chart