SPDR Gold Trust (GLD)

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Gold Sideways Trend Continues, Bear Flag Pattern Signals Potential Decline
By: Bruce Powers | May 7, 2024

• Gold remains in consolidation below key resistance levels, with a bearish flag pattern indicating potential for lower prices unless it rallies above recent highs.

Gold remains stuck in consolidation and has been trending sideways for the five days. Consolidation is occurring just below resistance represented by the purple 20-Day MA, currently at 2,330, and the 38.2% Fibonacci retracement at 2,322. The 38.2% price zone previously represented support and now resistance. Further, gold remains under a bear flag that triggered a sharp decline starting with a break below 2,320 last Tuesday. Since then, recent price action has done nothing to negate the potential for a deeper pullback and lower prices indicated by the breakdown of the flag.



Bear Flag on Deck

The bear flag shows a small rising parallel trend channel. Each boundary line has three touches from price. There is symmetry represented in the pattern as the channel can be divided in half. In other words, it is a clear and solid pattern that has been broken. It shows a pause in the degree of selling that occurred prior to the flag’s formation. Therefore, a continuation lower is the most likely resolution and that has been indicated by the breakdown last week.

Nevertheless, a five-day pause below the breakdown level does not show selling pressure increasing. It leaves open the possibility of a failure of the bearish pattern. A failure would occur during an advance prior to new retracement lows. However, a rally above last week’s high of 2,347 would need to occur for signs of a failed bearish pennant.

Key Near-Term Support at 2,227

Support from the recent consolidation is at last week’s low of 2,227. The next bearish signal will be indicated on a drop below that price level. Calculating the measuring objective for the bear flag provides a minimum target of 2,238. However, the orange 50-Day MA has been rising as the price of gold consolidates. If it continues to consolidate for a while longer, the 50-Day line may join a slightly higher target zone from 2,261 to 2,255. If it does, the chance of hitting that price zone will increase. The 50-Day line is currently at 2,246.

There is also a lower potential target zone from around 2,212 to 2,208. However, last month’s low support was at 2,228. If this lower price zone is reached, then the monthly low would have been broken. A drop below a monthly low would diminish the current underlying bullishness that remains in the market.

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