Gold Price Forecast: Drops Below Key Levels, Targets Lower Prices

Gold continued to retrace its prior advance on Thursday, as it fell to a new retracement low of 2,353. It continues to trade near the lows of the day at the time of this writing. The decline today dropped gold below the 20-Day MA, through the 61.8% Fibonacci retracement at 2,355, and below the 50-Day MA. It is on track to end the day below each of those price levels thereby indicating lower prices may be in the works before the retracement is complete.

Next Lower Target is 2,332

The next lower target for gold is around 2,332. That is where a descending ABCD pattern completes, and the two legs of the pattern are equal as far as the depreciation of price. Given today’s decline, this target has a good chance of being reached. Certainly, if today’s low is broken during Friday’s trading session, the 2,332 becomes a likely next target. There is also a potential support zone lower down from around 2,305 to 2,298.

That price zone is derived from a couple Fibonacci levels, including the 50% retracement at 2,298, and a trendline that goes across the bottom of the recent three-month consolidation pattern. However, be aware that the monthly low for July was 2,318. If the 2,332-support level does not stop the decline, the monthly level may be broken to the downside.

Lower Boundary of Channel Likely to be Tested

Caution is warranted if the lower price zone is reached, as it is a three-point line. Therefore, if it fails to hold as support gold could accelerate to the downside. Also, the overall top pattern in gold is a rising parallel channel. Both the top and lower boundary lines have three points thereby solidifying the pattern. In general, a rising parallel channel can trigger a bearish signal. That would happen on a decline below the 2,294-swing low from June 26 as it is part of the lower boundary price structure of the channel.

Breakout Above 2,389 Needed for Signs of Strength

Today’s low found support around the 50-Day MA and a top trend channel line. If support continues to hold and leads to a bounce, areas to watch for resistance include the 20-Day MA and previous 50% retracement level around 2,389. If gold can rally above there it has a chance to breakout above today’s high. If that happens the above bearish scenario may start to change.

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