Gold Price Forecast: Declines After Record High, Bearish Reversal in Process

Gold triggered a daily bearish reversal on Friday, following a new record high of 2,686 reached Thursday. There was a confluence of several rising ABCD targets from the 2,660 to 2,675 price zone. Notice that yesterday closed just below the 2,675-level following a breakout above that price level earlier in the session.

The decline today was clear as gold will likely end with a full red candle and daily close near the lows of the session. Moreover, the weekly chart will likely confirm weakness with a weekly close in the lower half of the week’s trading range. The middle of the range is 2,650. This sets up a bearish shooting star candlestick pattern.

Two Key Support Levels at 20-Day and 50-Day MAs

A drop below today’s low of 2,643 currently, will trigger a bearish continuation of today’s decline. Two key levels to help assess the health of the uptrend are identified first by the 20-Day MA, now at 2,568, and then the 50-Day MA, currently at 2,498. In each case, the moving average line has converged with the relative uptrend line, that also marks potential support.

On the way down gold may first encounter support around the 38.2% Fibonacci retracement at 2,633. A sustainable upside reversal from that price level would be a stronger indication of strength than a decline to lower levels. The next lower level to watch for support is the 50% retracement at 2,616, together with this week’s low of 2,614.

Previous High and 61.8% Retracement Point to 2,600

Nonetheless, once a market rises through a breakout level it may eventually pullback to test prior resistance as support. For gold that price level would be the previous trend high of 2,600 combined with potential support of the 61.8% Fibonacci retracement that sits at the same price. Below there is the 20-Day MA and rising trendline.

In addition to today’s bearish price action the relative strength index (RSI) momentum oscillator looks to be recovering from overbought as it is about to fall below the 70 overbought level. This would be supportive of a bearish continuation in the short-term. If gold stays above the 20-Day MA during a retracement, the potential remains for an eventually continuation of the bull rally for gold.

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