Gold Price Forecast: Retreats After Testing Resistance, Support Levels in Focus

Gold continued a two-day bearish correction on Friday that followed a test of resistance at the prior swing high of 2,721 (B) yesterday. The decline has been sharp, and it continues as gold remains near the lows of the day at the time of this writing. Lows have been testing support around the 20-Day MA, now at 2,653.

Weakness could carry over to next week since Friday may end at the 20-Day MA, and near the lows of the day. This puts the 20-Day line at risk of breaking. If it does lead to lower prices then watch how it behaves around the short uptrend line, an area where support may be found.

20-Day Support at Risk

The next lower short uptrend line is one measure of dynamic support for the near-term rising trend. A higher swing low at 2,605 (C) constructs the trend. Since that swing low is part of the price structure for the uptrend it will be a key potential support level to watch as a drop below it will signal a potential bearish reversal. And that could be followed by more aggressive selling.

In summary, key support is at 2,605 and the important resistance level is at 2,721. In the meantime, trendlines, moving averages and other price levels identified within the range may provide some guidance but not likely a sustained breakout signal. Consolidation may continue if gold stays contained within those two price points.

Bearish Weekly Pattern

This week will end bearish for gold as the weekly chart shows a shooting star candlestick pattern. The low for the week and potential support was at 2,627. It follows a bullish breakout above last week’s high earlier in the week. A weak weekly closing price will not provide confidence to the bulls and may help prolong the current range bound uncertainty.

Further, it could lead to an acceleration to the downside, which would be indicated on a drop below 2,627. Weekly support would then be at the two-week low of 2,614. That is not very far from the three-month low of 2,605 and the 20-Week MA at 2,608. Each is an area to watch for support if gold gets down there.

For a look at all of today’s economic events, check out our economic calendar.