Gold’s Bearish Challenge: Navigating Key Support Amidst Weakness

Gold Forecast Video for 26.01.24 by Bruce Powers

The risk of a continuation of the bearish retracement remains as gold further tests a support zone around the 50-Day MA (orange) and uptrend line. It is set to close today below the 50-Day line for a third day, a sign of weakness. In addition, the 20-Day MA was tested as resistance several times in the past five days and today gold tested the 50-Day line, which is lower, with today’s high of 2,025. So, what we see is typical progression of a weakening trend. This puts last week’s swing low at 2,002 in a strong position to be tested again or natural gas breaks below that level.

Gold Holds Key Support but Just Barely

A break below 2,002 will have gold next heading towards the completion of a falling ABCD pattern at 1,987. That price level is also where the 20-Week MA is currently. But, given the significance of the current consolidation zone to the integrity of the uptrend price structure, selling pressure may amplify on a breakdown. If it does, then the lower support levels may be tested, the key level being the 200-Day MA at 1,964.

Lower Support at 200-Day MA with Intermediate Level Above

A potential support zone begins a little above the 200-Day line with a prior swing low and 50% retracement at 1,973. That price level is also a monthly low thereby increasing its potential significance. Also, within that price zone is the target for a 127.2% Fibonacci extension of the falling ABCD pattern at 1,967. The 200-Day line rejected price to the upside only once since gold rallied back above the line in mid-October.

Advance Above 2,035 for Signs of Strength

Gold is on track to complete the week as an inside week unless volatility kicks in quickly, reflecting consolidation on a weekly basis. The high for the week is 2,038 and a breakout above that level will signal strength. However, a daily high from last week is close by at 2,039. A rally above 2,035 will put gold back above its 20-Day MA as well as the downtrend line marking dynamic resistance for the retracement. From there it has a chance to continue to rise. It would then need to get above the swing high of 2,062 for additional confirmation of strength.

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