Gold Price Forecast: XAUUSD Extends Slide Toward 50-Day MA Support Zone

Gold prices accelerated their decline on Wednesday as a new pullback low of $3,168 was reached. However, the bears remain in charge at the time of this writing as trading continues near the lows of the day. It is certainly possible that a lower traded price for gold could occur before the close of Wednesday’s trading session.

Bearish Continuation Triggered

A bearish continuation signal triggered on a breakdown from Tuesdays inside day. Like what is seen with a bull flag or pennant trend continuation pattern, an inside day can also provide a bearish setup. But the fact that the pattern followed a decline below the critical short term trend support line of the 20-Day MA, plays a part in its bearish implications when triggered.

Today’s low successfully found support at the prior trend high from April 3. This seems to indicate that the market recognizes the price level. Nonetheless, a weak closing price in the lower quarter of the day’s trading range indicates support may be broken. Other than a halt in the decline in prices, there is no sign of improving demand.

50-Day Line at $3,150

Since the 20-Day MA failed as support last Friday, the 50-Day MA has become a potential downside target. Gold is heading there now and has a good chance of reaching the line before the end of this week. Currently, the 50-Day MA is at $3,150. It was successfully tested as support at the swing low in early April. Therefore, support should be seen again during this test if the bullish momentum shown by the 50-Day MA is to be sustained.

Lower Prices if 50-Day Line Fails

Despite for the potential to see signs of support and a subsequent bullish reversal from the 50-Day MA, there is also the possibility that it may fail and the price of gold falls below it. The most recent upswing had characteristics of a blow off top and triggered a bullish breakout from a rising parallel trend channel (blue). That breakout subsequently failed, and related selling continues throughout today. A failed breakout tends to lead to stronger moves in the direction of the failure. In the case of gold, that would be down.

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