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Gold’s Decisive Drop: Unraveling Trends and Critical Price Levels

By:
Bruce Powers
Published: Jan 17, 2024, 21:25 UTC

Bearish signals intensify as gold breaches 50-Day MA and Fibonacci levels. 1,967 emerges as a significant target, challenging the precious metal's resilience amid correction pressures.

Gold bullion, FX Empire

In this article:

Gold Forecast Video for 18.01.24 by Bruce Powers

Gold was decisively bearish today as it dropped below the 50-Day MA at 2,017 and the 38.2% Fibonacci retracement level at 2,011. It is on track to close weak, in the lower quarter of the day’s trading range. An uptrend line was also broken. This puts gold in sight of completing a falling ABCD pattern at 1,987 and possibly continuing to weaken thereafter to lower price levels.

A screenshot of a graph Description automatically generated

1,987 Support Needs to Hold, Otherwise, 1,973

If the 1,987 level is exceeded to the downside gold heads towards a swing low at 1,973. That price matches the 50% retracement level. Subsequently, the 200-Day MA becomes a potential target. It is down at 1,963. There has only been one successful test of the 200-Day line as support since gold rose back above the line in mid-October. So, a second test would not be out of the question. Of course, that would be the 1,973-swing low support level doesn’t hold. It is interesting that the 127.2% Fibonacci extension of the falling ABCD pattern completes right around the 200-Day line at 1,967. In other words, that’s another target for that price pattern. The first was at 1,987.

Correction Should be Followed by Resumption of Bull Trend

If there ends up being only two legs down in the current correction, which started from the recent swing high of 2,088 (A), it should be followed by a resumption of the larger bull trend. We are seeing a continuation of the second leg down now, as of last Friday’s high (C).

Weekly Chart Supports a Deeper Retracement

Price action in the weekly chart supports a deeper retracement. Last week ended with a bullish hammer candlestick pattern. However, it needed to trigger an upside breakout to be valid and that didn’t happen. Instead, there was no breakout, and the pattern was invalidated with bearish breakdown instead. Failed patterns can lead to faster moves, and we are starting to see that now in gold.

This means downside momentum seems to be picking up and weighing on prices. If demand is not strong enough counter-selling pressure sellers will remain in control for longer than initially anticipated. That’s why the 200-Day line as a target is the maximum gold should fall while maintaining an intermediate and long-term bullish bias.

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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