Undercut-and-Run Shows Strength from Key Support Zone
Thursday’s low may have marked at least a temporary bottom, as it completed an undercut-and-run reversal pattern that triggered on a move above Thursday’s high. This pattern begins with sellers in control earlier in the session and a decline below a prior key support level. In gold’s case, that level was the March swing low. Later in the session, buyers regained control and drove price toward the session high, resulting in a close back above the prior support pivot. Subsequent follow-through buying was needed to confirm the bullish implications of the one-day reversal, and that confirmation has begun to emerge.
200-Day Moving Average Sets First Major Resistance Test
Looking ahead, the 200-day moving average near $4,459 stands out as the next key resistance zone. It was clearly recognized as support during the sharp bearish spike in March and again when approached again in late May. Gold is now experiencing its first meaningful rebound following a decline below that long-term trend indicator, placing the 200-day moving average in a position to act as resistance. Whether gold encounters resistance there or breaks back above the indicator, the price behavior around that level should provide valuable insight into underlying demand.
Corrective Structure Still in Play Despite Recovery Bounce
Although a potentially significant support zone was confirmed near the trend low, gold remains in a corrective downtrend. Therefore, it still needs to test resistance levels that previously acted as barriers during the decline. The first test of the 200-day moving average is likely to attract sellers and could lead to a pullback before another attempt is made to reclaim the indicator. As a result, it represents the first major upside target for the current recovery rally.
Just as the confluence of support indicators helped establish the recent low, the next phase of the recovery will likely depend on how gold responds to a similarly important confluence of resistance. Since the 200-day moving average covers the longest-term trend measure commonly followed, it represents a more significant dynamic resistance zone, particularly when combined with the downtrend line and surrounding price structure. Above it, an interim lower swing high at $4,595 is the next key structural resistance level.
