Gold’s rally has captured headlines, but even in the strongest uptrend, there typically comes a mean reversion at some point. Recently, theMarket on Close teamflagged overbought conditions in gold and reminded viewers that 5–10% corrections are healthy resets before the next leg up.
During last Friday’sMarket on Close livestream, John Rowland followed up by calling out a rare bearish candlestick for traders to watch, and highlighted the key technical levels for gold going forward.
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“This is looking like a very dominant reversal pattern… [but] in a bearish kicker when you get the second candle, you usually get follow-through over the next 2–3 days,” John said.
As John explained, context is key, and the bearish candle pattern can be negated if the price is able to recapture and close above 50% of the bearish kicker – which gold (GCZ25) has done, with simmering geopolitical tensions keeping a strong bid at the precious metal’s back so far this week.
In fact, instead of pulling back, the precious metal closed Tuesday at $4,164, one of the Fibonacci extension levels John called out during Friday’s live session.
But no asset moves in a straight line higher forever… right? For investors who have been impatiently awaiting a pullback in gold futures, here’s what our Senior Market Strategist is watching now, and the notable price points to watch on both sides of the trade.
John noted a mean reversion zone down near $3,850 as a potential target for a pullback.
On the flip side, $4,277.50 is the next Fibonacci extension level to watch on a continued rally. Traders should keep an eye on how gold reacts to new highs, and whether reversal candles form near peaks
As of today, our Senior Market Strategist is wary of trading gold actively from either side, though:
“At this point, gold is exhibiting behavior that is at odds with traditional technical indicators and may be indicative of something more significant, such as a loss of faith in the U.S. government, its debt, and the dollar,” John says. “From my perspective, I can’t buy it, I’m not going to sell it, and it might take time before it starts to behave like gold, steady and stoic.”
