Downward trend remains dominant
If further weakness follows today’s small pullback, the strength of the downtrend could regain influence and lead to the continuation of a developing ABCD pattern. The initial target of the pattern is 2,475 and this is where the downward measured moves are equal. Once equal, a potential pivot has been identified. However, analysis of gold’s trading history also shows a convergence of other indicators around the 2,475 target. This means it could potentially be a strong support zone and therefore could be considered as a possible maximum lower target for gold if the current bearish correction continues.
Decisive key determinant
Alternate scenarios are for gold to break nearby support levels and weaken, but continue trading above support from the November low (B) at 2,537, then consolidate. Or it breaks above the 20-day MA, currently at 2,641, and heads towards a test of resistance around the upper downtrend line. The five-day support is at 2,608, but it can be broken easily. A more significant potential support level is around this week’s low at 2,608, as this is a weekly low. This week ends as an inside week and therefore a drop through the bottom causes an inside week collapse.
Maintaining long-term bull trend
It is interesting to note that gold on the weekly chart (not shown) has been trading above the 20-Week MA support for most of the time since it was regained in October 2023. There have been several short dips below the line since then, but gold recovered quickly and there was never a week that closed below the 20-week line. That could change this week, but we’ll have to wait another week to find out.
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