Higher up the target zone is 2,688
If the 50-day line can then be reclaimed and buyers remain in control, the next higher target zone of interest should be around the 161.8% extended target for the minor ABCD pattern at 2,688. That price zone can take on extra significance because it coincides with a downward trend line. That trendline marks dynamic resistance for the current bearish correction.
It also marks the upper line of a parallel trend channel with the lower line connecting the November swing low (B). A previously descending trend channel remains on the chart as a guideline (blue dots). Note that resistance has been found around the initial upper channel line over the past four days.
Short-term strength within bearish formation
Although the downtrend channel is larger than the current rally and therefore considered to have a greater impact, gold reached a higher swing low on December 19 at 2,582. In itself, that is a bullish sign that requires further proof. Today, new evidence of an improvement in demand has emerged. However, they are short-term bullish price actions that form a counter-trend rally within a larger bearish trend channel.
Continued progress above the upper channel line would show an improvement that could lead to challenging the 2,726 swing high (C). Since that high was the second rejection by resistance, it would need to be reclaimed before there is any clear sign of a bullish reversal in gold and the potential for a continuation of the larger developing bull trend.
Drop below 2,622 signals Please note
Short-term support for gold is at the current low of 2,622. Note that the low is in support of the initial upper channel line (blue dots). It is also close to the resistance highs of the previous two days. Once previous resistance becomes support, the potential for a continuation higher improves. Furthermore, the weekly chart (not shown) shows that support around the 20-week MA is holding. Furthermore, this week could end at the highest weekly closing price for gold in six weeks. The highest weekly closing price during that time was previously 2,650.
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