Gold Inverse Head and Shoulder Pattern in Play

The gold price rebounded from the previous session’s losses after forming an inverse head and shoulders pattern. The low of the left shoulder was $4,453 in May, and gold recently touched $4,450 on Monday. The rebound was accompanied by increased volume, indicating renewed buying interest at the right shoulder support. If confirmed, this pattern could trigger short-term upward momentum.

An inverse head and shoulders pattern, which reflects a change in market mood, usually indicates a possible turnaround from a downturn to an upswing. This pattern's psychology suggests that buyers are gradually taking over market control from sellers.

Gold Fundamental Analysis

Gold opened lower on Monday and continued to decline during the early New York session, pressured by stalled peace negotiations between the US and Iran. The metal extended its pullback following the release of stronger-than-expected US ISM Manufacturing PMI data. The May ISM Manufacturing PMI rose to 54.0, surpassing expectations of 53.0 and marking the strongest factory expansion since 2022. For the remainder of the week, gold investors and traders should closely monitor the movement of the US dollar, US labour data, comments from Federal Reserve policymakers, renewed Middle East tensions, and the momentum of treasury yields.

Gold Technical Forecast

From a technical perspective, gold remains in an upward correction phase. The 4-hour RSI is climbing back above 50, which is an encouraging sign for bullish traders. The overall structure suggests a period of pause and consolidation following forced selling, rather than a continuation of the downtrend. At the time of writing, gold is trading above $4,475. Despite the recent rebound, medium-term technical indicators show that momentum remains subdued, with the latest recoveries appearing short-lived. Nevertheless, a further recovery may be attempted. If the XAUUSD head and shoulders pattern holds and remains above $4,450, it may extend its bounce towards the resistance level between $4,550 and $4,560. Conversely, a decisive break below the $4,450 to $4,440 range would shift the bias back towards further near-term downside.

 

Warning! This material is not intended as investment advice. Past performance data does not guarantee future returns. Investing in foreign currencies may affect your returns due to their fluctuations. Any transaction in securities may result in both profits and losses. The assumptions and expectations set forth in this material are only estimates that may not be accurate and may change depending on current economic conditions. These statements do not guarantee future returns.