Sharp Reversal Sparks Short-Term Strength
Gold did an about face and rallied to a seven-day high of $4,723 on Wednesday, reclaiming the 10-day moving average. Resistance was seen near the 20-day moving average but a strong close in the upper third of the day’s range will confirm strength of the one-day move. That could lead to a continuation towards the next resistance zone that lies near the 100-day and 50-day moving averages, from around $4,774 to $4,790 currently.
Compression Between Key Moving Averages
Short-term gold is now between support near the 10-day moving average and resistance near the 20-day moving average. Given the long-term significance of the combination of the two averages marking a similar resistance zone, signs of resistance are anticipated. In addition, they are located close to a resistance zone marked by the top boundary ling of a large rising trend channel.
Wedge Breakdown Defines Broader Direction
Gold recently broke down from a rising bearish wedge, completing a first leg down at Monday’s low of $4,501. That established a higher swing low, but a rally faces downward pressure, indicated by the wedge trigger. More significant lower targets start around $4,402, while the lower end of a zone is the 200-day moving average at $4,301.
Counter-Trend Rally Risk Before Next Leg Lower
A counter rally following the wedge trigger would be normal and expected. It provides the possibility of establishing a lower swing high and another leg down towards lower targets. This bearish scenario remains valid unless the 50-day moving average is reclaimed and the price remains above it. If the 50-day average is reclaimed, that means that the 100-day average was as well. Since the 50-day average was hit as resistance during the lower swing high of $4,890 (top of wedge), it validated the trend indicator.
Channel Structure Adds Downside Pressure
Gold falling back into the rising channel structure also weighs on price. An initial target based on the channel is its midline. That happens to be close to the 200-day moving average and it may soon cross above the midline.
Gold Price Forecast
Every new Gold analysis as it publishes, today's technical signal and key levels, live price — on one page.
See all Gold forecastsOutlook Favors Sellers After Bounce
In summary, following a bounce gold is anticipated to find resistance and turn back down. Sellers are likely to take control again and lower price zones tested before the correction completes.
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