Gold (XAU/USD) recovers after sharp decline to 1,872.01. This level coincides with the support 6/8 Murray at 1,875.
Early in the American session, gold is rising, having erased losses in the European session. XAU/USD fell to 1,872 the lowest level in two months and then went on a rebound that extended to 1,895.
Gold bounced around strong support located at around 1,875 (6/8 Murray). The recovery by almost $23 relieves downward pressure but does not change the overall downtrend.
According to the 4-hour chart, we can see that gold has been trading inside a downtrend channel since August 2021. Gold has strong resistance at 1,897. This level coincides with the 21 SMA and a little higher is the top of the downtrend channel which also acts as strong resistance.
You can see on the 4-hour chart that the bounce stalled around 1,895 near the 21 SMA which is key resistance.
A confirmation above 1,901 could be a clear sign of a possible change in trend in the short term. If gold consolidates above the psychological level of 1,900, we could expect it to reach the zone of 7/8 Murray at 1,937 or the 200 EMA located at 1,930.
Conversely, if gold fails to break the key level of 1,900, a technical correction is likely to occur and the bounce is likely to run out of steam. A pullback below 1,890 is likely and could reach 1,880 and even support at 1,875.
On the weekly chart, we can see that gold is in a strong uptrend since August 2021. The metal is likely to have found good support at the weekly 21 SMA located at 1,875.
According to the weekly chart, it is likely that if the price breaks the level of 1,875, it could reach the support of the uptrend channel around 1,850. Both levels could offer a good technical bounce to gold and it could resume its uptrend and could reach the psychological level of 2,000 in the next few weeks.
Our trading plan in the short and medium term is to buy above 1,875 with targets at 1,901; 1930; 1,965 and 2,000.
The eagle indicator on the 4-hour chart is in the oversold zone and an imminent bounce is highly probable in the coming days.