Analyzing Gold’s Price Action: Testing Support Levels and Indications for Reversal

Gold Forecast Video for 02.08.23 by Bruce Powers

Gold failed to hold Monday’s advance today as it turned down and sold off, falling below the most recent swing low support of 1,943 and is likely to close below it. Support was seen intraday off a low of 1,941, which matches the 100-Day EMA. However, although gold has stopped falling and has had a minor intraday bounce there are no clear signs of an intraday bullish reversal that may be sustainable.

Support Found Today at 100-Day EMA

The 100-Day EMA is an intermediate trend indicator which showed its significance recently when it was tested as support over 18 days starting in late-May. Then, over approximately 14 days in late-June and July it clearly acted as a resistance zone. Therefore, it has a good chance of acting as support on this pullback. This is the first test of the line as support since a bullish breakout of the 100-Day line occurred on July 12.

It is common to see price rejected off a moving average on the first test following a bullish or bearish breakout. For a longer period moving average the chance of seeing this behavior increases relative to a shorter period line. The area of the line is strengthened by the 50% retracement as it is only slightly lower at 1,940. Potential support of the two rising trend lines also come into play as tomorrow one of the lines will match the 50% price area, approximately.

Potential Bullish Three Drives to a Bottom Pattern Forming

Today completes the third leg down off the most recent swing high at 1,987. It forms a potentially bullish three drives to a bottom pattern. Given how close potential support of the two rising trendlines is to today’s low, a drop to those levels might still be seen before a bullish reversal occurs. Today’s high is 1,966 and quite a way higher than current levels. Nevertheless, on a daily basis a rally above that high is needed for a bullish signal. Wednesday will form a new candle that may provide tighter daily setup. Alternatively, an intraday time frame can be used for indications for when buyers start stepping up.

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