Gold’s Rollercoaster Ride: Oversold Signals and Reversal Potential

Gold Forecast Video for 04.10.23 by Bruce Powers

Gold continued its decline today, triggering a bearish trend continuation, before finding support at a low of 1,815 and bouncing. A falling ABCD pattern completed at 1,822, and gold is poised to close above that price level today. Today’s low is shy of the next key lower support zone around the prior swing low at 1,805. That low is part of a range from around 1,812 to 1,805.

Gold in Extreme Oversold Condition

As of today, gold has reached an extreme oversold condition based on the RSI oscillator. It shows a low reading of 19.89. That’s the lowest level for the RSI since August 2018. Such an extreme oversold condition tells us we’re likely getting very close to a low for gold, if not already there. Extreme moves can be followed by sharp moves in the opposite direction.

Steady Downtrend Since September 20 Swing High

Gold has been in a consistent decline since turning down from the September 20 swing high of 1,947. Except for a brief rally last Friday to above Thursday’s high, gold has sustained a series of lower daily highs, and mostly lower daily lows other than September 22. A decisive advance above today’s high of 1,833 provides an initial sign of strength, which is further confirmed on a daily close above that high. That would provide a clear change in the downtrend pattern.

Breakout Above Today’s High a Sign of Strength

A bullish reversal of the current low would have gold first heading into previous support zones, that could now act as resistance. The obvious levels include 1,885, 1,893, and 1,901. Each price level was previously a support level at a swing low. Further, the 200-Day EMA is currently at 1,907.

Risk of Hitting Next Lower Target Remains

Given the pickup in volatility recently, gold may still make a run to test support at the lower price target zone of 1,812 to 1,805. Selling pressure remains and there is not yet a bullish reversal. This would ensure a more complete flush out of weak holders before it prepares to get back in line with its long-term bullish uptrend. If today’s low of 1,815 is exceeded to the downside, the lower price zone is then likely to be hit.

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