Gold’s Rally Falters: Is a Deeper Retracement Ahead?

Bruce Powers
Updated: Oct 31, 2023, 20:27 GMT+00:00

Gold's rally loses steam, triggering concerns of a deeper retracement as it faces resistance.

Gold bullion, FX Empire

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Gold Forecast Video for 01.11.23 by Bruce Powers

Gold looks to have run out of steam today. It first advanced above yesterday’s 2,007 high early in the session before being hit with resistance that led to a decline to well below yesterday’s low. A one day outside day reversal is now in play. It may lead to a deeper retracement before gold is ready to resume its advance. Nevertheless, further signals are warranted.

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Drop Below 1,979 Signals Further Weakening

Following today’s close a break below today’s low of 1,979 will signal weakening. And further still on a drop below the three-day low of 1,777. Downside targets will then start with the 23.6% Fibonacci retracement at 1,963, followed a price range from 1,953 to 1,947. The price range consists of prior swing highs that are now potential support. If the 1,947 level is broken to the downside a retracement to at least the 38.2% Fibonacci retracement seems likely. Further down is the convergence of the 50% retracement and 200-Day EMA at the 1,912/1,910 price area.

Moreover, last week’s low support was at 1,953. Unless gold can trade below that price or above last week’s high, it will be trading inside week. Given that we are almost complete with Thursday’s trading session, there is a good chance it will finish the week trading inside last week’s range.

200-Day EMA is Key Support

The 200-Day EMA provides is a key price zone given its long-term significance as a trend indicator. If gold can stay above its 200-Day line the potential upside for the long-term trend is a legitimate scenario. Gold has consistently strengthened since it broke above the 200-Day line several weeks ago and has yet to test it as support. Today’s weakness may be the beginning of an attempt to do just that.

A successful test of support of the 200-Day EMA or above it during a retracement would be healthy for the developing uptrend as this is how trends progress. Price breaks through a resistance area and rises before eventually retracing some of those gains to test support of the price area that was previously resistance.

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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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