Gold’s Sharp Decline: Breaking Key Trends Signals Bearish Momentum

Gold Forecast Video for 27.09.23 by Bruce Powers

Gold falls hard, breaking back below the 200-Day EMA and the long-term uptrend line. At the time of this writing gold was trading near the day’s low of 1,899. That put gold below its most recent swing low of 1,900.93 (B) and negated the higher swing low, which is what it was previously. So, we no longer have a higher swing low in gold, which had been a bullish indication of the developing uptrend. Today’s low also tested the 78.6% Fibonacci retracement zone, which is at 1,900.

Drops Below Three Trend Indicators

Given that gold has fallen quickly below three trend indicators, the 200-Day EMA, a shorter internal trendline, and a longer trendline, it looks like it could continue to decline until a key support zone is reached. Bearish momentum today has been consistent, and the outlook deteriorates each time it falls below another key level (moving average, trendlines). A daily close below the recent swing low (B) will provide an additional confirmation of weakness.

Further Weakness Seen if Gold Closes Below 1,900

If gold closes below the 78.6% retracement zone it is likely going to at least the 88.6% Fibonacci retracement at 1,893. Nonetheless, there is a lower target zone prior to reaching the August 21 swing low of 1,885. There is a declining ABCD pattern that completes at 1,888. That is where the CD leg matches the price depreciation seen in the AB leg of the decline. Once the pattern completes, the potential for a bullish reversal exists. Further, a break below that level points to a continuation of the dominant trend.

Bearish Weekly Chart Triggers

Also supporting evidence for a continuation lower is seen in the weekly chart. Today, a breakdown occurred below last week’s low of 1,914, triggering a weekly bearish reversal. Last week’s candle pattern was a bearish inverted hammer. It follows a bullish upside weekly breakout last week and confirms a failure of that bullish move. The indication of failure began today and therefore might have room to continue to fall. Based on the weekly pattern, gold looks like it may eventually test support of 1,885, if not lower.

For a look at all of today’s economic events, check out our economic calendar.