Gold Price Forecast: Bearish Patterns Dominate

For the past several days gold has been consolidating as it attempted to strengthen into the 20-Day MA to test it as resistance. It has not been too successful so far, having reached a high of 2,633, which was established on Monday. Since last week’s swing low of 2,582 gold established three minor higher daily highs but remained within the price range from last Wednesday, which often leads to consolidation. An inside day looks likely for today, Tuesday. Resistance has been seen around the small rising trendline drawn from the November 26 swing low.

Bear Trend Dominates

Unless there are clear bullish signs soon, gold is expected to turn back down once it is done testing resistance. It established a lower swing high on December 12 (C), which put it in a position to trace out a falling ABCD pattern (purple) inside a declining parallel channel. Two weeks ago, gold completed a weekly bearish shooting star candlestick pattern that triggered to the downside last week. Moreover, the bearish weekly signal was confirmed by last week’s close below the prior bearish week. This week, gold is set to trade inside week and looks likely to end that way as volatility diminishes during the holiday season.

20-Day and 50-Day Moving Averages Hold Clues

Trend resistance is indicated by the convergence of the top downtrend line and 20-Day MA with the 20-Day line currently at 2,643. A little higher is the 50-Day MA trend indicator at 2,667. A sustained rise and daily close would be needed above the 50-Day line before the outlook starts to turn more bullish. Of course, a sustained rise above the 20-Day line would provide an earlier sign of strengthening.

A new top trendline has been added to the chart in red, starting from the October peak (A) and connecting the recent swing high (C). It establishes a possible new angle of descent for the declining channel and a dynamic resistance line, but only if gold rises above the 50-Day MA. Until then, downward pressure remains. Nevertheless, if gold can get above and stay above the 20-Day MA, the prospect of eventually testing lower support levels before the correction is over decreases.

Drop Below 2,582 is Bearish

If gold falls below the recent swing low of 2,582, which essentially successfully tested support around the 78.6% Fibonacci retracement of a minor upswing, then a test of support around 2,532 becomes likely. And if that price area fails to sustain support, gold may dip to the 2,477-target zone that includes the 61.8% retracement at 2,473 and the completion of a falling ABCD pattern at 2,474.

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