Gold’s Sharp Pullback and Potential Support Levels

Gold Forecast Video for 28.07.23 by Bruce Powers

Gold pulled back today sharply, following an advance to above yesterday’s high. Support was seen support around 1,943. The decline almost reached the 50% retracement at 1,940. Converging with the 50% level is the 100-Day EMA (purple), now at 1,941, thereby strengthening the potential for support around that price zone. During the pullback gold fell through the recent swing low at 1,952 and the 34-Day EMA (orange) at 1,951, and it looks like it will close below the 34-Day line.

Retracement to 1,935 Looks Like the Lowest Price Level that Might be Tested

Today’s retracement does not change the outlook in gold as the uptrend price structure remains intact. The lower support zone for gold looks to be around where the two rising trend lines cross, marking a price of around 1,935. Below there and gold will be below the lower rising line. It would already be below the 100-Day EMA.

A Test of the 100-Day EMA Looks Likely

Given the increase in volatility today a test of the 100-Day line looks likely before the retracement is complete. In late-May to around mid-June gold tested the 100-Day line as support over 17 trading days before it fell below it on June 20. Subsequently, it acted as resistance over about 14 days before it got back above the line on July 12. This type of price behavior indicates that the price of gold has a relationship with the 100-Day EMA. Therefore, during the current retracement it should be the maximum lower support zone. Either way, we want to watch price behavior around the 100-Day line. As noted above, having the 50% retracement level nearby increases the chance for gold to find support around the line.

A move back above the 34-Day line of 1,950 will provide the first sign of strength, followed by a rise above the recent swing low of 1,952. A daily close above each price level will provide some confidence that the advance has meaning. Nevertheless, a daily signal does not occur until gold advances above today’s high of 1,982. Of course, the lower levels are for more aggressive market participants.

Bearish Signal on Weekly Chart

One final comment about the weekly chart. Last week completed an inverted hammer candlestick pattern. It triggered today on a drop below 1,946 and is being mentioned here because it a longer time frame signal and because it could be the beginning of a drop to below the uptrend lines. We’ll have to watch price action closely during the correction for further clues.

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