Gold Price Forecast: Bear Flag on Deck

Gold fell on Thursday and triggered a breakdown of a potential bearish flag pattern (purple lines). It dropped through both the 20-Day MA and the bottom line of the flag, which are marking the same price area. The low for the day was 2,624, at the time of this writing, which was below both the trendline and 20-Day line but not below the recent minor swing low within the flag at 2,622.

A daily close below the 20-Day MA, now at 2,631 will provide further bearish evidence, while a decline below the 2,622-swing low further triggers a breakdown. Nonetheless, a daily close below 2,622 will confirm the bear flag breakdown.

Watching for Bearish Confirmation

If the breakdown continues to progress the recent swing low 2,605 should be exceeded to the downside. The bear flag is contained within a larger developing bearish pattern reflected in a falling

ABCD pattern. That should increase the chance for gold to reach lower targets if sellers do take back control. In other words, if downside momentum increases. In addition, there was a sharp one-day decline in gold before the flag formed. The sharp decline created a clear flagpole. An initial lower target for gold is around the recent swing low of 2,536. That swing low completed a 50% retracement. Further, since there is only one more day left to the week, gold is on track to complete an inside week.

Falling ABCD Pattern Points to 2,470 Potential

The developing descending ABCD pattern indicates an initial lower target at 2,470. Since the bear flag is accompanying the ABCD pattern it would seem to improve the chance that gold tests the 2,470-price zone before the current correction is complete. Of course, support around the 50% level at 3,522 or a little lower, may be enough to stop the descent and lead to a bullish reversal. That will be the next key pivot if the flag breakdown progresses.

If the breakdown does not progress and instead a rally above the four-day high of 2,657 occurs, the flag is further developing. Key potential resistance would then be around the 50-Day MA at 2,668 and last Friday’s high of 2,666.

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