Mixed Signals in Gold: Bulls Face Resistance, Bears Eye Breakdown

Gold Forecast Video for 08.06.23 by Bruce Powers

Gold is giving mixed signals. Earlier in the session it triggered a bullish trend continuation signal on a move above yesterday’s high, but subsequently hit a wall of resistance at a high of 1,970. That led to aggressive selling that took gold well below Tuesday’s trade and another test of 100-Day EMA as support. The 100-Day line is currently around 1,938 and the 1,970 high completed another test of the 34-Day EMA as resistance.

Day’s Resistance Lower than Last Bounce Reflecting Selling Pressure

Note that today’s test of the 34-Day line fell short of the previous test last week where gold went above the 34-Day EMA on two days before reversing lower. Today, gold attempts to go higher and finds resistance below the 34-Day line instead of above it. Further, there is now another lower swing low. These are signs of weakening rather than strengthening. However, we need to consider the fact that gold is now swinging within a developing consolidation pattern near recent trend lows. So, it is prone to conflicting signals during this phase.

Gold is Range Bound

Gold is trading within a range between support of the 100-Day EMA, now at 1,938 and the 34-Day line at 1,973. Given today’s price action a breakdown from the 100-Day line is a possibility. If that happens the first target is close by at 1,925, which is the 100% completion of a declining ABCD pattern. Further down is the 61.8% Fibonacci retracement and 127.2% Fibonacci extension target from the ABCD pattern around 1,912.

Drop Below 100-Day EMA Support?

Of course, a decline below the 100-Day line triggers a breakdown from the rising parallel channel that started off the November 2022 swing low at 1,617. Gold advanced as much as 28.8% as of the May 4 high of 2,082. The current retracement is a correction off that trend high and record high. It is fine if the price goes a little below the 100-Day line and long-term uptrend line if the duration is short and the recovery swift and decisive. That scenario is similar to what happened during the prior retracement. Gold dropped below the 100-Day EMA over six days before a clear and sharp rally took it higher.

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