Gold Price Forecast: Targets Lower Levels Amid Bearish Signals

Gold fell back below a lower rising channel line on Monday and then stayed below it today, Tuesday. It reached a low of 2,605 following a drop below yesterday’s low before finding support. That low completed a 61.8% Fibonacci retracement at 2,607.

This puts the precious metal in a bearish position following a sharp rally last week. The five-day counter-trend advance ended on Friday with gold in a strong position, above a minor interim swing high of 2,710. Nonetheless, the rally ended on Monday following a slight new high of 2,721. Sellers took back control from there, leading to an enthusiastic drop.

Drops Below Key Levels is Bearish

Although last week’s rally was persistent and saw the price of gold reclaim a rising trendline and two moving average lines, Monday’s sharp drop to a five-day low and weak close negated any bullish indications that may have occurred. For example, potential resistance on the way up was quickly overcome as gold reclaimed a rising channel line, the 50-Day line (orange), now at 2,666, and the 20-Day MA (purple), currently at 2,662, one day at a time.

Those lines represent key potential resistance areas currently, as the correction sets up for a continuation lower. In addition to a new daily close below the moving averages and trend channel, notice that the 20-Day MA is starting to cross below 50-Day MA.

Falling ABCD Pattern Points to 2,470

Since Monday generated a lower swing high, a descending ABCD pattern has been added to the chart in case the correction evolves to a new swing low. Certainly, given yesterday’s bearish close and again today, below the rising trendline, rallies may be met with resistance that leads to lower prices.

The initial target from the pattern, where there is 100% symmetry in the price change between the two falling swings, AB and CD, is at 2,470. Since that price level coincides with both a 61.8% Fibonacci level at 2,473 and a previous support and resistance zone, it becomes a lower target. Further, an uptrend line also goes through that price area and should be watched for signs of support if gold does continue to weaken.

Descending Channel May Lead to Decline Below 2,537

A declining parallel trend channel is shown on the chart by taking the top trendline and making a parallel level to touch the recent swing low at 2,537. It can provide a guide as gold progresses. For example, resistance can be anticipated at or below the top channel line. Additionally, if gold gets above that line and stays above it, demand would be improving rather than declining. The bearish case would be retained if gold stayed below the top downtrend line.

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