Downward Pressure Could Take Gold Lower
If a rally above today’s high follows, then there is a possibility that the retracement may be complete. However, the more likely scenario is a continuation of the retracement to test lower price levels. Gold fell below the 20-Day MA yesterday and it tested it as resistance today. This is generally bearish behavior when occurring within a downtrend. Therefore, a drop below this week’s low of 2,353 indicates a likely bearish continuation. The next lower targets look to be around 2,332 and lower price zones could also be reached.
Support Near Bottom of Consolidation Range Begins at 2,305
Further down near the bottom of the current consolidation zone is the next lower support area from around 2,305 to 2,298. It starts with the completion of a falling ABCD pattern extended by the 127.2% Fibonacci ratio. There is also the lower boundary line of a consolidation range plus the 50% retracement at 2,298. The consolidation pattern takes the form of a rising parallel trend channel.
This is a potentially bearish pattern but only if there is a breakdown from the formation. That would happen on a decline below the June 10 swing low of 2,294. This doesn’t mean that a breakdown will occur, but it is a possibility.
Rally Above 20-Day MA Needed for Signs of Strength
Of course, support may be seen at or above the lower support zone followed by a bullish reversal. Also, the 50-Day MA may continue to act as support leading to an upside move. A rally above the 20-Day MA would provide a sign of strength, which would confirm on a daily close above it. Yesterday’s high of 2,401 would then provide the next upside pivot level.
Correction Too Short to Complete
There have been two prior corrections in gold since the April 12 swing high of 2,431. Each lasted two or three weeks following the swing high week. The current correction in gold is about to complete its first week down from the swing high week. This means that there is likely at least one more week to go before the correction bottoms, leaving time for gold to test lower price levels.
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