Gold: A Coiled Spring Ready to Unwind

As gold prices recalibrate in recent weeks, let’s explore pivotal levels worth monitoring for potential trend continuation and mean reversion trades.

Pullback Leads to Price Compression

After a robust surge of over 20% between February and April, gold has entered a phase of 'mean reversion' over the past fortnight.

Gold prices have retraced to the basis of the Keltner Channels, a zone closely monitored by trend traders.

Furthermore, the market is exhibiting signs of compression within tightening trading ranges. A formation of lower swing highs into horizontal support has shaped a small descending triangle pattern. Notably, each of the last two trading days has witnessed the narrowest range in over seven consecutive sessions.

This intense price compression resembles a coiled spring, poised for release at any moment.

Key Triggers to Watch

Prior Day's High (PDH):
Given the overarching uptrend, a decisive break above PDH could serve as the catalyst for resuming the trend, potentially leading to a retest of recent highs.

Last Week's Lows:
Conversely, a decisive breach below last week’s lows might trigger a deeper retracement towards the volume-weighted average price (VWAP) anchored to the February 14th swing lows.

Gold Daily Candle Chart

(Past performance is not a reliable indicator of future results)

Gold Hourly Candle Chart

(Past performance is not a reliable indicator of future results)