The bear trend dominates
Unless there are clear bullish signs soon, gold is expected to fall again once resistance testing is complete. It established a lower swing high on December 12 (C), allowing it to follow a falling ABCD pattern (purple) within a falling parallel channel. Two weeks ago, gold completed a weekly bearish shooting star candlestick pattern, which led to the downside last week. Moreover, the bearish weekly signal was confirmed by last week’s closing price, lower than the previous bearish week. This week, gold trading will take place this week and it seems likely that it will end that way as volatility decreases during the holiday season.
20- and 50-day moving averages provide clues
Trend resistance is indicated by the convergence of the upper downtrend line and the 20-day MA, with the 20-day line currently at 2,643. Slightly higher is the 50-day MA trend indicator at 2,667. A sustained rise and a daily close would be needed above the 50-day line for the outlook to become more bullish. Of course, a sustained rise above the 20-day line would be an earlier sign of strengthening.
A new top trendline has been added to the chart in red, starting at the October peak (A) and connecting the recent swing high (C). It establishes a possible new decline angle for the descending channel and a dynamic resistance line, but only if gold rises above the 50-day MA. Until then, downward pressure will remain. Nevertheless, if gold can get and stay above the 20-day MA, the prospect of eventually testing lower support levels before the correction is over diminishes.
A drop below 2,582 is bearish
If gold falls below the recent swing low of 2,582, which actually successfully tested support around the 78.6% Fibonacci retracement of a small bounce, then a test of support around 2,532 becomes likely. And if that price area fails to hold support, gold could fall to the 2,477 target zone, which includes the 61.8% retracement at 2,473 and the completion of a descending ABCD pattern at 2,474.
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