Gold’s blistering ascent captured the market’s attention on Wednesday as it scaled a fresh all-time high of $3,895. However, the celebration was short-lived. The precious metal encountered fierce resistance at this psychological zenith, triggering a swift sell-off that erased a significant portion of the day’s gains. This price action has etched a potential bearish “shooting star” candlestick pattern on the daily chart, signaling that the bulls may need to catch their breath before the next charge.
A Textbook Rejection at a Critical Juncture
The rally to the new peak was not without merit. Earlier this week, XAU/USD decisively broke out above a key confluence resistance zone, which included the upper trendline of a multi-month rising channel. This breakout was a clear validation of the underlying bullish sentiment.
Furthermore, as noted in a recent technical analysis update from DailyFX, Wednesday’s high perfectly met the 261.8% Fibonacci extension level of a significant ABCD pattern tracing back to the 2018 lows. This is a common profit-taking target for algorithmic and institutional traders. The immediate and sharp rejection from this precise level demonstrates the market’s technical memory and shows that sellers are still actively defending major Fibonacci thresholds.
Bullish Momentum Intact Despite Short-Term Fatigue
To put the current rally into perspective, the move from the August 18 swing low to this week’s peak represents a gain of $584, or 17.7%. When compared to prior bullish waves within this multi-year cycle—such as a 35.5% surge and a 22.0% advance—the current leg, while powerful, shows moderated percentage gains. This historical context, often highlighted by resources like Investopedia’s guide on bull market cycles, suggests that while the pace may be normalizing, the trend itself remains robust and may still have room to run.
In the immediate term, however, the formation of a shooting star candlestick at a clear resistance level cannot be ignored. It typically indicates that buyers lost control during the session and that sellers are gaining the upper hand, pointing to a potential period of consolidation or a short-term pullback.
Key Levels to Watch: Support and the Path to $4,000
For traders, the immediate focus shifts to key support levels. The first major line in the sand is the dynamic 10-Day Simple Moving Average (SMA), currently hovering around $3,764. This moving average has acted as a reliable springboard throughout this leg of the uptrend, and a retest of this area would be a healthy and expected development to recharge bullish momentum without damaging the broader technical structure.
Looking ahead, the overarching trend remains decidedly constructive. A decisive daily close above the $3,895 resistance could act as a powerful catalyst, opening the door for a move toward the next significant resistance zone between $3,969 and the psychological $4,000 mark.
While short-term traders should be mindful of bearish reversal patterns, the larger framework continues to favor the bulls. Any dip is likely to be viewed as a buying opportunity by market participants who believe the fundamental drivers for gold, such as inflation concerns and currency dynamics—topics frequently explored by the World Gold Council—remain firmly in place.
