Sellers Reassert Themselves With Sharp Drop
Gold triggered a sharp bearish reversal on Tuesday, falling hard to a seven-day low of $4,996. The decline led to a successful test of support near the 20-day moving average, which was followed by an intraday bounce. The day’s range encompassed the full range of five of the last six days, reflecting strong conviction by sellers.
Also, the recent advance took the form of a rising bearish wedge, which broke to the downside following a drop below a short uptrend line marking dynamic support for the bounce from the February low at $4,402.
Wedge Apex and Fibonacci Clash
The top of the wedge is Monday’s high of $5,419. Note that on the way to that high, a 78.6% Fibonacci retracement at $5,345 was exceeded briefly before the day ended with a bearish shooting star candlestick pattern. That Fibonacci level has been an initial upside target for gold. With the level now reached and followed by a bearish reversal, sellers appear to be regaining control, at least until key support is tested. It is further confirmed by a 100% projected target for a rising ABCD pattern.
Dynamic Support Holds Firm
Potential support is near the 50-day average at $4,830 and a higher swing low at $4,842 that helps form the wedge pattern. As the 50-day average rises, it will soon surpass the swing low.
The 50-day average represents significant dynamic trend support, having been successfully tested as support during the decline to February’s low. Even with the spike in volatility, given a 21.4% decline in the price of gold, support was seen near the 50-day average.
Trend Channel Signals Underlying Strength
Gold successfully broke out of a long-term rising trend channel in early December, after an earlier false breakout in October. That demonstrated increased slope and long-term momentum. The recent bearish correction subsequently confirmed the top line of the channel as support.
Gold Price Forecast
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See all Gold forecastsSince the 50-day average was marking a similar support area as the top of the channel, its rise above the channel highlights underlying demand strength and the preservation of the new, steeper uptrend angle.
Near-Term Battlefield: $5,419 vs $4,830
In summary, gold now sits with key near-term resistance at $5,419 and support at the 50-day average, currently at $4,830 and rising.
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