Gold Price Forecast: Rebound or Further Decline?

Gold remained under pressure on Tuesday, falling to a new pullback low of 2,633 before finding support. A 78.6% retracement of the near-term upswing was completed nearby at 2,638. It looks like today will be the third day in a row that gold closes below the 20-Day MA. Further, both Monday and Tuesday highs specifically tested resistance at the downtrend line. Gold broke out above the downtrend line last week but was unable to sustain the advance. By Friday it was back below the line. Nonetheless, gold may end today’s session in the top half of the day’s price range and above yesterday’s low of 2,644.

Fibonacci Retracement Completes

Given the completion of a minor 78.6% retracement today and the subsequent intraday bounce, a rally above today’s high of 2,659 would trigger a potential daily bullish reversal. What makes that pivot more interesting is that a trendline break and 20-Day MA breakout would also occur. When two or more indicators mark a pivot area, the subsequent breakout can sometimes lead to more aggressive buying.

Rangebound between 2,765 and 2,605

Essentially, gold continues to trade within a range between two key price levels. The direction of the breakout could lead to a continuation in whichever direction that is. At the top of the price range is last week’s high of 2,675. A sustained breakout above that price level triggers a bullish continuation of the trend starting from the November low (A) and puts gold in a position to test higher targets, around 2,750 and 2,790. The bottom of the range is at 2,605.

Downside Risks Remain

Downside risk remains nonetheless and a drop through today’s low of 2,633 would provide the first indication that sellers remain in charge. At least in the short-term as the potential for a bullish reversal remains as long as gold stays above the higher swing low 2,605. But if that low is broken to the downside the November swing low at 2,537 becomes a potential target. Price levels from the weekly chart also need to be considered given that last week ended with a bearish shooting stay candlestick pattern. It shows a tall tail and close near the lows of the range as the sellers were in control by the end of the week. A bearish weekly signal is indicated on a drop below last week’s low of 2,627.

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