Downward Pressure Remains
The longer gold attempts and fails to rally, the greater the chance for a retracement lower. There is now a clear bear flag that has formed on the daily chart for gold. Today’s low of 2,320 provides confirmation of the lower parallel line of the pattern. A decisive breakdown from today’s low triggers the bearish pattern. If it occurs the 2,291-swing low will be at risk of being broken as the next lower support zone is around 2,261 to 2,255, derived from two Fibonacci levels.
Further down is the target from the bear flag. It comes in around 2,238, which is below the 2,255-price zone but above the next lower price zone from 2,212 to 2,208. Notice that both an uptrend line and 50-Day MA are included in that lower price zone. The 50-Day line matches the top of the zone. If the 20-Day MA is broken to the downside the chance of reaching the 50-Day increases.
Downside Risk Remains if Higher Prices Stay Within Flag Boundary
Regardless of the potential for a deeper retracement, the possibility for an upside continuation remains. A decisive breakout above Friday’s high of 2,352 would be needed for bullish signs followed by a daily close above that price level. If this bullish scenario unfolds, keep in mind that higher prices that trade inside the rising parallel bull flag, remain within the flag.
The flag may expand yet remain bearish if trading continues inside the two rising parallel lines of the flag. A daily close above the top flag channel line would be needed for a clear bullish continuation signal.
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