Gold Price Forecast: Faces Resistance, Risk of Deeper Pullback Looms

Gold rallied earlier during Wednesday’s trading session but found resistance at the day’s high of 2,432. That led to a pullback that is at risk of breaking below the day’s low of 2,405, at the time of this writing. Not a convincing rally and it puts gold at risk to testing recent lows with the possibility of falling lower. The recent swing low shows support at 2,384, which successfully tested support of the 20-Day MA.

Weekly Bearish Signal

Last Friday gold fell sharply following a new record high of 2,484. It represented aggressive selling. Given today’s failure to hold the advance, a continuation of the current bearish retracement becomes more likely. Moreover, a bearish weekly signal triggered this week as gold fell below last week’s low of 2,394. A drop through 2,384 aligns with the bearish weekly breakdown and targets lower prices.

ABCD Pattern Targets 2,332

Looking at the prior two retracements in gold, each had formed a descending ABCD pattern prior to completing the retracement. Might the current retracement form the same pattern before a bullish reversal holds? Certainly, that would fit the pattern. Each of the prior two retracements occurred after gold reached a new record high. If the current retracement is not yet complete and leads to a drop below 2,384, gold will be well on its way to testing lower price levels.

Since there is a minor swing high potentially complete today, an ABCD pattern to the chart. It shows a lower potential target for gold at 2,332. If reached, it would put gold back below its 20-Day and 50-Day MAs. However, at that target gold would remain above support at recent lows of 2,294 and 2,277. Also, it is possible that another rally to test resistance above today’s high occurs before gold falls to a new retracement low. If that happens the C point of the ABCD pattern will be adjusted.

Larger Picture Monthly View Remains Bullish

A bullish reversal triggered in the monthly chart of gold this month. It is supportive of an eventual move into new record highs. The low of the month should be watched for signs of weakness as a drop below 2,318 will trigger a monthly bearish reversal. If gold stays above 2,318 it continues to have a chance to rally and challenge recent highs once the correction is complete.

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