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Gold Price Forecast: Faces Correction Risks After Record High Return
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Gold Price Forecast: Faces Correction Risks After Record High Return

Signs of Weakness

Today’s pullback breaks below potential short-term support at 2,758, the previous trend high, as well as the upper channel line of the ascending parallel trend channel. Each failed to show signs of support. Notice how resistance has been hit around this line almost every day for the past week, indicating that the market has recognized the prices the line represents. A decline below the short-term uptrend line at the lows of the past few weeks has been cited as an additional sign of weakness. A daily close below 2,740, today’s three-day low, could provide additional evidence of weakening demand.

2,696 is the Primary Subgoal

If gold continues to fall, it is likely to test support near the 20-Day MA at 2,696. The line has represented the trend support area since it was recaptured on August 9. Therefore, a definite drop below this may indicate a possible change in character. The fact that it has been following the internal uptrend line more closely lately also points to its potential importance in the near term. It is currently setting a price similar to 2,686, the top of the flag that triggered the last more significant upside breakout.

If 20 Day Line Fails, 50 Day Line Could Be Next

There is also a possibility that the correction will gain greater significance as it breaks below the 20-Day MA and stays there. In this case, the next lower target would be the 50-Day MA, currently located at 2,650, along with the corresponding uptrend line. The 50-Day line is aligned with the next lower uptrend line. This line is also the bottom of the ascending parallel trend channel. The upper line of the channel is a copy of the lower line, which has largely matched the 50-Day MA since August 5th.

For a look at all today’s economic events, economic calendar.