Bearish reversal alert: Gold's head and shoulder pattern indicates a sharp decline ahead"

XAU/USD chart and technical analysis

The price of Gold has been in a steep bullish trend since last month and gained almost 11% since then. However, the appearance of the bearish head and shoulder pattern indicates a sharp decline ahead.

The head and shoulder pattern is a bearish reversal pattern that appears when bears dominate the market and a bearish trend is followed afterwards.

I am expecting the price will retest the neckline around the $1,978.25 resistance level before dropping to the $1,912.2 support level and beyond.

Gold fundamental analysis

Fundamentally, the gold rally was mainly influenced by the Middles-East crisis. As the intensity of the crisis declines the price of gold will also possibly drop.

Moreover, the dollar index was making a correction and was dropping which also helped the gold rally. Now that the Middle East crisis is less relevant and the US dollar seems gaining strength a short trend on gold will likely follow.

Gold to US dollar trade idea takeaways

• The appearance of the head and shoulder pattern on gold indicates a potential bearish trend ahead.
• The price will possibly drop to the $1,912.2 support level in the coming days.
• Multiple take-profit levels have been added to secure profit along the way.
• The risk-to-reward ratio on this trade is 1:4.2.
• The entry and stoploss prices have been placed at secure levels with the least probability of getting hit.
• Good luck!