Lower Target Beckon
There are several indications that gold could fall further before the correction is complete. For one, it attempted a bull breakout of a descending parallel trend channel on December 10 but quickly faltered, leading to a drop back below the top channel line.
A failed pattern has the potential to reverse sharply in the opposite direction. That may be what is happening now with gold. Since a bearish reversal occurred from the top of the channel, the bottom of the channel is an eventual possible target. This doesn’t mean that it will be reached, but it does indicate that the sellers could be in charge for a while longer.
Bearish Indications
Notice that as gold declined from the 2,726-swing high (C) it dropped back below the 20-Day MA (purple). Then, on Tuesday and Wednesday the high of the day tested the 20-Day line as resistance. It found resistance as price was rejected to the downside from the area around the 20-Day MA. This shows prior support being confirmed as resistance, and it is bearish behavior. Bearish sentiment was then confirmed today with an advance to test resistance around the bottom of a small rising trendline starting from the 2,605-swing low.
Next Target 78.6% Retracement at 2,576
The next lower potential support level is around the 78.6% retracement at 2,576. However, as noted above, if the trend channel remains valid the most recent swing low at 2,537 (B) could easily be tested once again. If that price zone fails to stop the descent, then the next lower price zone around 2,473 becomes a target. That price level is the 61.8% Fibonacci retracement for the upswing that began from the May swing low. It also includes the target for a falling ABCD pattern at 2,475.
For a look at all of today’s economic events, check out our economic calendar.
Source: Gold Price Forecast: Bearish Correction Deepens
