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Gold Faces Critical Test: A Deeper Retracement Looms

By:
Bruce Powers
Published: Sep 13, 2023, 20:14 GMT+00:00

Gold's recent behavior raises concerns as it drops below the 200-Day EMA, hinting at a deeper retracement towards 1,900 and possibly 1,893.

Gold, FX Empire

In this article:

Gold Forecast Video for 14.09.23 by Bruce Powers

Gold successfully tested the 200-Day EMA as support yesterday and it held. This was an opportunity for gold to subsequently strengthen. Instead, today we have a drop back below the 200-Day line, a new retracement low, and gold is on track to close below the 200-Day line, and possibly closing below the lower uptrend line as well. This is not bullish behavior thereby opening the door to a deeper retracement.

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Today’s Price Action Points to 1,900

A drop below today’s low signals a continuation lower and puts gold back below the uptrend line. At that point gold would next be heading to the 78.6% Fibonacci retracement at 1,900. Further down is the initial 100% completion of an ABCD pattern at 1,893. That’s where the decline of the CD leg of the retracement matches the drop seen in the beginning AB leg of the trend. Also, that price level matches support seen at the June 29 swing low.

If the correction continues following a retracement to the 1,893 area, then gold is likely going to test recent swing lows around 1,884. That price area is further noted by the completion of an extended ABCD pattern at 1,883. An extended ABCD pattern takes the price change in the AB leg and extends it by a 127.2% Fibonacci ratio to find a new target. That distance in price is then subtracted from the swing high at C (opposite for a rising ABCD pattern). Lower targets zones are also highlighted on the chart, and are largely from Fibonacci confluence, where multiple measures identify a similar price zone.

Bullish Reversal First Targets 1,916

For the upside, in the case where today’s low holds as support and leads to a bullish reversal, a breakout above today’s high of 1,916 launches a bullish signal. Follow-through will then be key to whether a bullish reversal can be sustained currently. A daily close above that high will be the first sign of confirmation of strength indicated by the upward move. Subsequently, initial areas of potential resistance start with this week’s high of 1,916, followed by the two-week high around 1,924.

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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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