Gold Breaks Key Support Levels, Setting Stage for Further Declines

Bruce Powers
Published: May 16, 2023, 19:58 UTC

Bearish triggers, including shooting star candle, amplify gold's downward momentum.

Gold, FX Empire

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Gold Forecast Video for 17.05.23 by Bruce Powers

Gold breaks down through support of its short trendline and 34-Day EMA, plus a weekly low. It is now on track to close below both, which will confirm the breakdown. The first major support zone starts around 1,966 and goes down to 1,934.

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Completion of Declining ABCD Pattern Indicates Potential Six-Week Low

The top of the support zone at 1,966 is the completion of a declining ABCD pattern. This pattern expects the CD leg of the decline to match the price depreciation seen in the first leg down at AB. If reached, it would put gold at a six-week low. On the downside of the range, the target from the breakdown of a rising channel is the beginning of the formation. The pattern begins at the 1,934-swing low. The 50% retracement of the latest upswing is at 1,944. This level is frequently seen as a minimum retracement of the prior trend.

Critical Support at the Large Uptrend Line

Potential support at the large uptrend line is critical. That would be the maximum gold should drop before finding support. In another couple of days gold will not be able to hit the lower 1,934 target zone without hitting the uptrend line first.

Gold Broke Through Three Key Near-Term Support Levels

In addition to the bearish triggers noted above, gold broke down from a weekly bearish shooting star candle from last week, that occurred inside the range of the prior week. So, today gold broke through three key near-term support levels and is likely to close the day below each of them. This improves the chance that gold will at least reach the initial target from the completion of the ABCD pattern.

The bigger picture in gold remains bullish as long as it stays above the uptrend line at the bottom of a large ascending trend channel. And more significant is the relationship with the 200-Day EMA. That line is down at 1,877. The 200-Day was tested with a double bottom in the first quarter of this year. Price was clearly rejected to the upside as the subsequent rally was around 15%, to the May 4 trend high.

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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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