Gold’s Downswing Intensifies: Is the Precious Metal Nearing a Bottom?

Gold Forecast Video for 29.09.23 by Bruce Powers

That didn’t take long. Gold continued its descent today, quickly reaching its next identified support zone starting at 1,866. It then kept falling, breaching the low of the range at 1,853. Support was subsequently seen at the day’s low of 1,858, leading to a bounce. Today’s low could be the low for the correction or gold may keep falling to the next potential support zone.

Relative Declines

At today’s low, gold was down by 4.6% from the top of the current downswing at 1,947. When looking at the downswings from the May swing high, there are swings that range from 2.7% to 7.2%. The current decline is the third largest indicating there may still be more downside to go.

Continued Weakness Targets 1,850

The next lower price zone to watch for support is at 1,850/1,843, and it includes the 50% retracement for the uptrend begun from the November 2022 lows. Also, that price zone completes the shorter measured move that is shown on the chart with red arrows. Around 1,850 is where the first downswing (1) matches the decline in the second (2). Certainly, given the strong downside momentum seen in the past few days, and the break below today’s price zone, the next lower level has a chance of being reached before the correction is complete.

RSI Falls Further than Prior Two Major Corrections

As of today, the relative strength index (RSI) oscillator has reached oversold as it dipped below the 30 level. Notice that the RSI is now below the level reached in the two prior corrections (August, February/March). And it is approaching the 26.30 RSI reading that was reached at the trend bottom, hit a year ago. This means that gold looks to be getting closer to the bottom as it is approaching relatively extreme levels on the RSI.

Rally Above 1,880 Points to a Bounce

Nevertheless, today’s bottom could hold and lead to a bounce. In that case, a rally above today’s high of 1,880 shows strength and could see gold continue higher in the short term. The previous swing low of 1,885 would then be the first target and area for potential resistance. A daily close above that level will show strength, at least enough for gold to keep bouncing.

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