Analyzing Gold’s Narrow Trading Range: What’s Next for the Precious Metal?

Bruce Powers
Published: May 24, 2023, 20:02 UTC

Gold prices remain range-bound as uncertainty dominates, struggling to break above resistance levels and facing potential downside pressure.

Gold, FX Empire

Gold Forecast Video for 25.05.23 by Bruce Powers

Uncertainty reigns as gold again trades within a narrow range. For the past five days it has been in consolidation around the 1,960-peak reached in February. So far, the low of the correction off the recent record high of 2,082 hit three weeks ago, is 1,952. That low completed a 6.2% decline.

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Downward Pressure Remains

Downward pressure remains as gold has been unable to rise above the five-day high of 1,986 as it trades within a relatively narrow range. Resistance during the five days is also marked by the 50-Day EMA line (blue). Once price falls below the 50-Day line for the first time after being above it, the chance for further downside increases. There has been little sign of strength and each attempt to end the day above the 50-Day line has failed. If it doesn’t go up, it is likely to continue lower.

Further downside would see gold first targeting the 1,944 region, which would complete a 50% retracement. A little lower is the 100-Day EMA trend indicator at 1,934. In three days the 100-Day line will converge with the long-term uptrend line thereby adding a degree of significance to support around the area of the uptrend line and 100-Day EMA.

Extended ABCD Pattern Further Confirms Support Zone

There is also a pattern that completes around the 50% retracement area. A falling ABCD pattern was discussed in the column in the past that completed at 1,966. That’s in the middle of the current five-day range. At that point the second leg down in the correction (CD) matched the decline in the first leg down (AB), reflecting symmetry between swings.

Nonetheless, since price may fall further, we can extend the measurement using a Fibonacci ratio to get a second and lower target from the pattern. To do this we apply the trend-based Fib extension tool. Instead of the CD leg matching the AB leg, we apply the 127.2% Fibonacci ratio to the price distance in the AB leg, then subtract that from the high at C. The result is a second and lower target at 1,943. So, the bottom line is if gold falls below this week’s low of 1,952, it is likely to find support no lower than 1,934.

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About the Author

Bruce boasts over 20 years in financial markets, holding senior roles such as Head of Trading Strategy at Relentless 13 Capital and Corporate Advisor at Chronos Futures. A CMT® charter holder and MBA in Finance, he's a renowned analyst and media figure, appearing on 150+ TV business shows.

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