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Gold Remains in a Correction with Lower Prices Likely Near-term

By:
Bruce Powers
Published: May 17, 2023, 20:14 GMT+00:00

With a 38.2% Fibonacci retracement completed, gold's performance signals underlying demand, but a drop below 1,975 may lead to a further retracement.

Gold, FX Empire

In this article:

Gold Forecast Video for 18.05.23 by Bruce Powers

Gold completes a 38.2% Fibonacci retracement today with a low of 1,975. Subsequently, support was seen leading to an intraday bounce. Regardless, given the clear bearish signals in gold it may have more of a correction to go before it is ready to resume its advance.

A screen shot of a graph Description automatically generated with low confidence

Gold in a Position to Reach Prior Swing High Around 1,960

Yesterday, gold triggered a breakdown below the short trendline at the bottom of the rising channel, the 34-Day EMA, and a weekly candle. Today will be the second day that gold closed below the 34-Day line since rising above it in early-March. In addition, today gold fell to a three-week low. Each is a bearish sign. It looks like gold is in a position to at least reach the prior swing high (now possible support) around 1,960 before finding critical support. Just above that swing high is the completion of a falling ABCD pattern at 1,966.

Rally Back into Rising Consolidation Channel Would Indicate Strength

Nevertheless, a rally back into the rising consolidation channel would indicate strength that may continue. The 34-Day EMA can be used as a proxy for the lower boundary of the channel. You can see how today the lower channel line and the 34-Day line have converged to identify the same price of approximately 1,995.

Gold has respected Fibonacci levels recently so there is a chance that the 38.2% retracement completes the correction. If so, it would be an indication of strength as a deeper retracement would be normal, particularly given the strong prior advance of 15.6% from the February 28 trend low (2). A completion at the 38.2% level shows that buyers are still aggressive and underlying demand in the precious metal remains.

Drop Below Today’s Low of 1,975 Signals Continuation of Retracement

A drop below today’s low of 1,975 signals a likely continuation of the retracement. The target of 1,966 from the ABCD pattern is the beginning of a potential support range that goes down to the swing low of 1,934. Watch for a bullish reversal once reaching 1,966 and below there. Key trend support is the lower trendline of the large rising parallel channel along with the 200-Day EMA, now at 1,878.

For a look at all of today’s economic events, check out our economic calendar.

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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