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Gold Bearish Signals Point to Deeper Retracement
By: Bruce Powers | May 2, 2024

• Top trendline and 20-Day MA now act as resistance after previously behaving as support, indicating a bearish turn for gold..

Resistance was tested again today in gold for the second day in a row following the breakdown from a bear flag on Tuesday. Notice that resistance occurred around prior support represented by the 38.2% Fibonacci retracement level of 2,322. The 38.2% price zone was tested as support on the first pullback from the recent 2,431 record high on April 15. This is typical price behavior in a market that is turning bearish. Prior support levels become resistance. Although the bull trend remains well intact a deeper retracement is likely before it is ready to resume.



Signs of Weakening as Previous Support Becomes Resistance

Similar behavior was seen recently around the top trendline and 20-Day MA. Each previously represented a support zone. Following the sharp selloff on April 22 that dropped gold below the top trendline, it was tested as resistance. Once the 20-Day MA failed as support it was subsequently successfully tested as resistance. Combined with the breakdown of a bear flag on Tuesday, gold looks to be telegraphing a deeper retracement. And the bear wedge just triggered, so it remains in the early stage of another leg down. Nevertheless, a decisive advance above this week’s high of 2,347 would negate the bear flag.

Several Lower Targets

Following a drop below this week’s low of 2,282 gold will likely first be heading towards a small Fibonacci confluence zone from 2,260 to 2,255. If it keeps falling the minimum 2,238 target from the bear flag comes into view. Now that the 50-Day MA has risen a bit above the next lower target zone, it falls close to the flag target at 2,229. A little lower is a 2,212 to 2,208 price zone consisting of the initial target from the descending ABCD pattern and the 50% retracement of the swing started from the February low, respectively.

April Low at Risk

Of note is last month’s low of 2,228. It is significant since it was a monthly low. A drop below it is bearish by itself, but the implications would depend on what happens next. Does gold continue to fall to test lower price zones? If it does, the speed of recovery of the 2,228 will be telling.

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