Gold Price Forecast: Target lower levels amid bearish signals

A decline below key levels is bearish

Although last week’s rally was sustained and gold prices regained a rising trend line and two moving average lines, Monday’s sharp decline to a five-day low and weak close negated any bullish signs that may have emerged. For example, potential resistance was quickly overcome on the way up as gold hit a rising channel line, the 50-day MA (orange), now at 2,666, and the 20-day MA (purple), currently at 2,662, one day reclaimed a time.

These lines currently represent key potential resistance areas as the correction points to further decline. Note that in addition to a new daily close below the moving averages and trend channel, the 20-day MA is also starting to cross below the 50-day MA.

Falling ABCD pattern points to 2,470

Since a lower swing high was created on Monday, a descending ABCD pattern was added to the chart in case the correction develops into a new swing low. Given yesterday’s bearish close and below the rising trend line today as well, rallies could certainly face resistance leading to lower prices.

The initial target of the pattern, where there is 100% symmetry of price change between the two falling swings AB and CD, is at 2,470. Since this price level coincides with both a 61.8% Fibonacci level at 2,473 and a previous support and resistance zone, it becomes a lower target. Additionally, an uptrend line also runs through this price area and should be watched for signs of support if gold continues to weaken.

The descending channel could lead to a decline below 2,537

A falling parallel trend channel is depicted on the chart by taking the upper trendline and reaching a parallel level to reach the recent swing low at 2,537. It can serve as a guide for gold development. For example, resistance can be expected at or below the upper channel line. Furthermore, if gold rises above this line and stays above it, demand would increase rather than decrease. The downtrend would persist if gold stayed below the upper downtrend line.