Gold Price Forecast: XAU/USD breaks support as market looks for next catalyst

• Gold trades below key $3,200 support as bearish pressure builds after recent highs.
• XAU/USD consolidates within a bullish pennant, signaling potential trend continuation if support holds.
• A surge in momentum below $3,200 may trigger a deeper retracement toward key Fibonacci levels.

Gold prices remain under pressure as investors reassess the interest rate outlook and digest mixed signals from recent US economic data. At the time of writing, XAU/USD is down 2.23% on the day, trading below $3,200, extending a week-to-date decline of 4.26%. 

The pullback reflects uncertainty surrounding the Federal Reserve's (Fed) policy stance, as softer inflation data clash with firm labor market conditions. This macro backdrop has kept Gold range-bound just below its all-time high, with traders looking for fresh direction.

Gold bears test bullish pennant support

On the daily chart, Gold has formed a bullish pennant, a continuation pattern that typically signals a potential resumption of the prevailing uptrend. The April surge forms the flagpole, while current price action is consolidating within converging trendlines, indicating tightening market conditions and indecision among market participants.

However, the integrity of the pattern is now under pressure. Price has slipped below the 20-day Simple Moving Average (SMA), currently at $3,316.20, reflecting short-term weakness. Additionally, the Relative Strength Index (RSI) has declined to 47.13, pointing to neutral-to-bearish momentum. These developments suggest that the bullish setup may be faltering.

The immediate focus is on the horizontal support at $3,200, which marks the lower boundary of the pennant. With prices currently below this level, a confirmed break would invalidate the pattern and likely trigger a deeper correction. Conversely, a move above $3,300, particularly if it clears the descending trendline resistance, would reaffirm the bullish bias and potentially open the path to new highs.

Gold (XAU/USD) daily chart

Gold slips below $3,200 as bullish momentum fades

From a broader perspective, the weekly chart shows that Gold remains in a consolidation phase following its ascent to a record high of $3,500 in April. This advance was underpinned by safe-haven demand and market expectations of future interest rate cuts. However, the rally was quickly met with profit-taking, evidenced by a long upper shadow on the weekly candle -- a signal of rejection and growing resistance.

Since that peak, Gold has traded within a narrow horizontal band between $3,200 and $3,300, representing a pause in the uptrend rather than a full reversal. The long-term bullish structure remains intact, supported by an ascending trendline originating from the January low. Importantly, price is still holding above the 23.6% Fibonacci retracement level at $3,291, drawn from the January low to the April high.

Gold (XAU/USD) weekly chart

While the broader trend favors the bulls, the near-term outlook hinges on how price behaves within the pivotal $3,200-$3,300 range.

A decisive breakout above $3,300, especially if accompanied by rising momentum and a break of descending trendline resistance, would confirm the continuation of the broader uptrend. In this scenario, Gold could retest the $3,450-$3,500 area.

A confirmed breakdown below $3,200 would invalidate the pennant structure and expose Gold to deeper retracements, with support levels at $3,161 (38.2% Fibonacci) and $3,057 (50.0%) offering potential downside targets.

Until a breakout occurs, Gold is likely to remain range-bound, with short-term direction dictated by incoming macroeconomic data and Fed policy signals.