Gold Price Forecast: Bear Flag Pattern Signals Potential Bearish Continuation

Gold has formed a developing bear flag pattern (purple) since a 2,605-swing low was established a week ago Tuesday. Notice that the pattern has encountered both the 50-Day MA (orange), now at 2,669, and the 20-Day MA (purple) at 2,635, as it developed.

Today, support was seen at 2,632, around the convergence of the lower rising parallel line of the flag formation. Given the sharp selloff following a lower swing high of 2,721 (C) last week, the expectation is for an eventual bearish continuation. Once the top of the flag is determined by a flag breakdown, a potential target can be assessed.

50-Day MA Resistance

The area to watch for potential resistance is around the 50-Day MA as a daily close above it would be a sign of strength. Since the line was successfully tested as resistance last Friday with the high of 2,666, it may again represent resistance. Also, it has the potential of being the top of the flag, as does the 2,666 high. Currently, within the flag there is a higher daily swing low at 2,622 and therefore a decline below that price level would be bearish. Earlier indications of weakness may be noticed around the lower parallel line or the 20-Day MA.

Lower Swing High Followed by Bearish Behavior

Since last week’s swing high established a lower swing high, there is the potential for a bearish continuation of a developing ABCD pattern (orange). If the bear flag triggers, the possibility of reaching lower targets will increase. The prior swing low of 2,537 combines with the 50% retracement level at 2,534. Further down is a potential support range from 2,4873 to 2,470, consisting of the 61.8% Fibonacci retracement and the target from a falling ABCD pattern, respectively.

200-Day MA Down at 2,441

The long-term trend indicator, the 200-Day MA, is a little lower at 2,441. That moving average is important for the long-term gold trend. Notice that the line was reclaimed in mid-October 2023. There were then several tests of the line as support and price reversed to the upside each time. However, the current decline presents the possibility of another test of the 200-Day line as support following a strong advance and movement up and away from the line. Given the above bearish short-term implications, the possibility of gold eventually testing support around the 200-Day line needs to be considered.

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