Gold price initially traded higher yesterday as the outbreak of the new coronavirus shook market investors. However, XAUUSD quickly gave up its gains and even tapped $1,546.15, before finishing the day at $1,557.93.
In doing so, gold price formed a lower high which followed two consecutive highs. When you enrol to our forex trading course will learn how that this chart pattern is called head and shoulders. It is considered as a bearish indicator because the lower high indicates that the market could be running out of buyers. The critical price on XAUUSD is at $1,550.00 where the neckline support is at. A bearish close below this level could mean that there is more downside ahead for XAUUSD. Near-term support on gold price is at $1,536.75 where gold price bottomed in January 14. This could happen if fears about the coronavirus are contained.
On the other hand, if support at $1,550.00 holds, we could see XAUUSD rally. A close above the most recent high at $1,559.74 would invalidate the head and shoulders pattern. This would set January 21 highs at $1,567.40 as the next near-term resistance level.
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