Gold Price Forecast: Risk of Lower Prices Remains

Gold continued to consolidate on Wednesday as it has been trading between resistance at the 20-Day MA and support at the 50-Day MA this week. This indicates that downward pressure remains and puts at risk a breakdown through the 50-Day line. The 20-Day line is currently at 2,415 while the 50-Day MA is at 2,379.

A drop through the 50-Day line increases the chance for a drop below the recent swing low at 2,353. If the 2,353 level fails to maintain support, then a declining ABCD pattern will be triggered. Note that the initial target from that pattern is 2,347, while a secondary target is 2,311.

Weekly Breakdown Triggered

Earlier this week a bearish breakdown from last week’s low of 2,370 triggered. A daily close below that price level will confirm weakness indicated by the breakdown. Gold has been trading within a large consolidation pattern since the initial new record high of 2,431 was hit in the first half of April. Therefore, it would be normal for it to test support around the bottom of the pattern before the retracement is done. If this scenario plays out the extended target for the falling ABCD pattern is at 2,312. That level is close to the bottom trendline for the consolidation pattern.

Strong Support Starts at 2,294

Strong support is then at earlier swing lows of 2,294 to 2,287. Therefore, a decline below the top number will signal weakening and a decline below 2,287 will confirm a bearish breakdown from the consolidation top. Interestingly, by reaching the 2,312-target zone, the decline in the current retracement will better match to two earlier retracements that saw declines of 6.7% and 6.3%.

Weekly Trend Indicator May be Challenged

It is also interesting to see that the 20-Week MA marks support slightly below this week’s low at 2,353. The line has marked dynamic support for the uptrend since mid-October 2023. Therefore, a decline below this week’s low could lead to more aggressive selling than has been seen this week so far. The downside target in that case could be around the internal uptrend line. There is a 161.8% extended target for the falling ABCD pattern at 2,266, and that can be used as a proxy for the trendline, for now.

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