Gold Demand Zone Holds Bears at Bay For Now


Gold Talking Points:

  • After a volatile start to the month of March Gold prices calmed a bit last week, holding support at a key spot on the chart.
  • The weekly chart of Gold produced an evening star that confirmed the week before last, which keeps the door open for longer-term bearish themes. Last week’s hold of support has built in a bullish channel, which highlights a possible bear flag formation.
  • The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.

It’s a big week for Gold prices. The yellow metal came into the month of March surging on fear from the Russian invasion of Ukraine. The war bid led to a strong spike but Gold fell just short of testing the all-time-high that printed in the summer of 2020. And that weekly candle from early-March ended up showing a vigorous reversal off of that failed high, with the weekly bar closing as a gravestone doji.

The following week is what helped to create the evening star however, as that week’s price action retraced even more of that prior breakout, bringing prices back to the point of origination around the 1900 psychological level.

Evening stars are often followed with the aim of bearish reversals and that potential remains as we move into a new week and a new quarter. And given that we’re nearing the end of the month, the monthly bar in Gold is worthy of review as it’s highlighting a strong reversal after that failed high. If the monthly bar ends up closing in the red, this will look much more attractive for bigger picture reversal scenarios going into the second quarter of this year.

Gold Monthly Price Chart

Chart prepared by James Stanley; Gold on Tradingview

Gold Weekly Chart

From the weekly chart we can start to focus in on that evening star formation. The demand zone of interest has some historical relevance, as you can see on the above chart. The zone from 1900-1923 is what ultimately caught the highs back in 2011.

And it’s played a role with more recent price action, as well, helping to set support when the breakout began to pullback two years ago, soon becoming resistance that held the highs in late-2020 and mid-2021. This same zone even marked resistance in late-February, but as war tensions were heating up prices took out that resistance, and it’s now functioning as support, holding bears at bay after that evening star formation filled in.

Gold Weekly Price Chart

Gold weekly price chart

Chart prepared by James Stanley; Gold on Tradingview

Gold Shorter-Term: Bear Flag Builds Off of Support

Going down to the four hour chart focuses on that recent support test in the 1900-1923 area. That support test came into play shortly after the FOMC rate decision, with just a temporary test below the 1900 psychological level during the rate decision itself. As stocks launched higher in a recovery move, Gold prices put in something similar, bouncing from that longer-term support zone.

That bounce has so far developed in a somewhat orderly fashion, holding along a bullish trend channel that bases off of that demand zone. This, when taken with the prior sell-off, makes for a shorter-term bear flag formation.

The break of that flag can give rise to bigger-picture bearish themes, with alignment of the longer and shorter-term points of view. But, sellers should be careful as this zone of support from 1900-1923 is rather clear and obvious and it may take more tests before it ultimately ends up giving way.

Gold Four-Hour Price Chart

Gold four hour price chart

Chart prepared by James Stanley; Gold on Tradingview

— Written by James Stanley, Senior Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX





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