Story in a chart | Gold could lose its sheen! Reversal seen near $1,700: Gaurav Bissa

Gaurav Bissa

International Gold has been on a strong uptrend but it is now forming a bearish Harmonic Bat pattern with potential reversal zone around $1,800 per ounce.

Gold has been one of the best performing assets over the last few months. It has given a strong breakout on the weekly charts around $1,450 and was seen retesting it before continuing the momentum.

When equities are not performing one generally expects Gold to rally. This has been the case so far. However, the yellow metal is now forming a bearish Harmonic Bat pattern on the weekly charts with a potential reversal zone around $1,700 levels.

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Gaurav Bissa

LKP Securities

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Harmonic Pattern is a reversal pattern and in this case, it is expected to push gold toward $1,550 levels. This view gets negated above $1,775 levels.

The yellow metal witnessed a breakout in 2019 and since then it has been moving in a strong uptrend touching $1,700 levels recently.

Harmonic Patterns have a tendency to unfold in a very strong and quick manner implying that as long as gold trades below $1,700 it can test levels of 1,550 and 1,450 as marked by horizontal lines in the chart.

This postulate is also supported by RSI which has reversed from 85 levels. This has been the reversal zone in the past as marked by circles in the chart.

There has been a bearish divergence formed on the weekly chart recently which further supports the view of a fall in prices of gold.

This view will get negated once gold starts trading above 1,775 levels which is a critical resistance for the bullion. There were three strong rejections from the $1,775 level in the past.

(The author is Assistant Vice President, LKP Securities)

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