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

Bruce Powers
Published: May 17, 2023, 20:14 UTC

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

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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.

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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.

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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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