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Friday’s peak, gold bears and consequences of their actions.

Technical Picture of Gold

We’ll begin today’s gold price forecast with the long-term picture of gold.

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Let’s recall the article posted on Aug.1, 2024:

So, how high could gold go in the coming day(s)?

(…) it seems that we could see a realization of the pro-bullish scenario about which you could read in Quick Gold Alert posted on Jul. 16:

(…) So, what might happen if the bulls continued to march north?

(…) we could see an attack on the red resistance line based on the previous important highs (formed in Aug. 2020 and Apr. 2024), which stopped the bulls in May (currently at around $2,473).

What’s next?

A potential breakout above this resistance could open the way to the next psychological barrier of $2,500.

At this point, however, it is also worth mention the breakout above the upper border of the blue rising wedge marked with dotted lines. That price action (which took place in May 2024) triggered a potential climb even to around $2,520, where the size of the upward move would correspond to the height of the formation (marked with blue rectangles on the chart).

From today’s point of view, we see that the situation developed in tune with the above scenario and gold hit a fresh all time high of $2,522.50 on Friday.

Thanks to this upswing, gold bulls realized the quoted scenario, which encouraged them to take profits of the table. This opportunity also noticed their opponents, which translated into a reversal and a slide below the previously broken red resistance line based on the previous important highs.

In this way, the yellow metal invalidated the earlier breakout, which together with the above-mentioned realization of the pro-growth scenario doesn’t bode for the bulls (at least at the moment of writing these words as the new month has just begun).

How did this price action affect the medium-term picture of the commodity?

Let’s examine the weekly chart to find out.

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From this perspective, we see that the recent upward move took gold to one more important resistance – the upper border of the long-term blue rising trend channel, which continues to serve as the nearest medium-term resistance.

What else can we infer from the above chart?

When we take a closer look at the volume that accompanied last week’s candle, we clearly see that it was lower than during earlier declines. Such a situation doesn’t confirm an increased bulls’ involvement in the move, suggesting that bigger correction should not surprise us in the coming week – especially when we factor in negative divergences between the price and all weekly indicators (additionally, the sell signal generated by the Stochastic Oscillator remain in the cards, supporting the sellers).

At this point, it is also worth noting that such price action will be even more likely and reliable if the bears manage to close this week under the previously broken upper border of the green rising wedge.

Having said that, let’s take a look at the short-term changes.

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The first thing that catches the eye on the daily chart is an invalidation of the earlier breakout above the upper border of the black rising channel.

Thanks to Friday’s decline, the price also dropped below the lower border of the short-term green rising trend channel (another invalidation of the earlier breakout), which increases the probability of further deterioration in the coming days – especially when we take into account the significant increase in volume (which confirms the sellers’ strength) and the current position of the daily indicators (negative divergences between all indicators and the price, which suggests that the sell signal are just around the corner).

Summing up, although gold futures started Monday with another pro-bullish gap, the barrier of $2,500 stopped the buyers, triggering a quite sharp decline that took the price not only below Friday’s low, but also under the 38.2% Fibonacci retracement, which suggests that implementation of the bearish scenarios is very likely in the coming week – especially when we factor in the sell signals generated by the daily indicators. Nevertheless, please keep in mind that if the nearest support zone withstands the selling pressure, we can see one more attempt to go north before the next move to the downside.

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