As gold's price action continues to narrow within a 5-month consolidation, traders await confirmation of whether the formation represents an inverted head and shoulders pattern with an extended right shoulder, or a triangle consolidation -- keeping markets on edge for a breakout signal.

The 3450-3500 zone stands as a critical resistance barrier. A confirmed breakout above it could lead gold prices to extend toward 3780-3800 (equal to the height of the pattern), and ultimately test the 4,000 checkpoint -- the target of a long-term monthly cup and handle pattern.

On the downside, key supports lie at 3320 and 3280. A clear break below these levels could confirm a steep bearish breakout toward 3130 and 2900, which may, in turn, set the stage for long-term bullish opportunities back toward the 4,000 level.

-- Razan Hilal, CMT