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Gold Struggles Amid Technical Challenges
By: Bruce Powers | April 29, 2024

• Bearish flag forms, increasing retracement risk. Drop below 2,320 triggers breakdown.

Not much of a change for gold on Monday as it continues to attempt to advance from the 2,291-swing low hit last Tuesday. Although it is on track to close in the top quarter of the day’s range with a bullish hammer candlestick pattern it remains stuck around the 20-Day MA and a top rising trend channel line. Since the low last Tuesday, it has managed to complete a 38.2% Fibonacci retracement but not much higher. Together, these are some of the technical factors that continue to weigh on the price of gold.



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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