Gold Price Forecast: Weakness Puts Key Support Levels in Focus

Following a two-day bounce earlier in the week, gold pulled back from Tuesday’s high of 2,364 on Wednesday to reach a low of 2,334. It fell below Tuesday’s low of 2,340 and continues to trade near the lows of the day at the time of this writing. Following a one-day close above the purple 20-Day MA yesterday, gold is on track to close below it today. Further, yesterday’s high found resistance just below the uptrend line. That follows a drop below the trendline last Thursday.

Bearish Behavior Points to a Deeper Retracement

The behavior of gold around the uptrend line and 20-Day MA are bearish signs. It shows a possible continuation of the retracement as each line was an area for support previously and now, they are marking resistance. Also, the two-day bounce earlier this week forms a small bearish flag pattern, and it triggered today with the drop below yesterday’s low. Whether it can properly follow through to the downside as a bear flag might is not yet clear as key support is not much lower. The potentially important 50-Day MA trend indicator is at 2,321. Of course, last week’s low of 2,325 would need to be busted first before the 50-Day line would be tested as support.

50-Day MA Support is Key

If the 50-Day MA fails to maintain support on a deeper retracement, a long-term top trend channel line is just below it, followed by the 50% retracement 2,289. The area around the 50% retracement is where support was seen on the most recent swing low with a low price of 2,277. It may be that the current correction will complete with trend having a lower rising slope angle from where it has been.

Angle of Ascent is Declining

Notice that the initial sharp advance from the February 14 swing low proceeded at a high angle. The angle subsequently came down a little once the initial trendline was busted to the downside on April 23. A new trendline was then drawn to hit the recent swing low. Following the current price correction in gold a lower slope angle of ascent will be indicated. Another new uptrend line will be drawn once a new swing low is established that changes the angle of the line.

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