Although gold bears attacked yesterday, the Dec. peak remained beyond their reach. What can we expect next?

Technical Picture of Gold

Let’s start today’s analysis with the quotes from Tuesday’s article:

(…) despite Friday’s success, gold bulls didn’t even manage to test the barrier of $2,200 during yesterday’s session, which raises the first suspicions that their strength may have been weakened – especially when we take into account the size of volume (…)

As you see, yesterday’s move materialized on the smallest volume since the breakout above the upper border of the purple triangle, which encouraged the bears to act before today’s U.S. market open (…)

(…) gold slipped under $2,180, which means that yellow metal moved under the previously broken blue line marked on the weekly chart. (…), such price action suggests that the bulls have lost their strength and the declines may deepen in the following hours.

If this is the case, the first target for the sellers would be the lower border of the orange consolidation (marked on the above chart) at $2,161.

From today’s point of view, we see that the situation developed in accordance with the pro-declining scenario, and the bears reached the mentioned target with ease.

All the above-mentioned disturbing technical factors encouraged the sellers to push the price even lower, which resulted in a drop to an intraday low of $2,158.20.

Despite this deterioration, the bulls didn’t give up. Taking advantage of the proximity to the nearest important support (the red horizontal support line based on the Dec.4, 2023 peak)), they closed ranks and started fighting for the lost levels.

As a result, gold came back above the previously broken lower border of the orange consolidation, invalidating the earlier breakdown. This success triggered further improvement, and yellow metal closed the day at $2,166.10.

How can we call such closure a success? After all, gold ended the day below the upper border of the blue rising wedge seen on the weekly chart!

Yes, that’s right. But as I wrote yesterday, this invalidation of the breakout is not confirmed and could be considered as a bearish development only if we see weekly closure below $2,180. Until this time, the blue line serves as the nearest resistance.

Let's go back to the daily chart.

Have the bears gained any technical signs that they can use to their advantage?

The sell signal generated by the Stochastic Oscillator has become more pronounced, but the indicator itself is still in the overbought area. The CCI and the RSI moved lower, getting closer to generating sales signals.

The volume, which accompanied yesterday’s decline, was visibly higher than the day before, which confirms the sellers’ involvement in the drop. Nevertheless, it was lower than last week, which suggests that the bears haven't caught wind yet.

What’s next?

Despite yesterday’s red candle, the price is still trading inside the orange consolidation, which suggests that as long as there is no successful breakdown (and a daily closure) under the lower line of the formation, a bigger move to the downside is not as sure as it may seem at first glance – especially when we factor in the fact that although gold moved lower during yesterday’s session, the sellers didn’t manage to push the price to the previously broken Dec. 2023 peak (not to mention sinking below it).

Summing up, in my opinion, another bigger move will be more likely and reliable after gold leaves the consolidation.

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