Gold Just Can’t Seem To Breakout

Confirmed, unconfirmed, verified, and invalidated: breakouts and breakdowns are now ubiquitous. And the implications are bearish for gold.

Let’s start today’s analysis with a discussion of the key market that everyone is interested in – gold.

ChartDescription automatically generated

Gold’s Failed Breakout – A Sell Sign

In short, gold just invalidated its small breakout above the declining blue resistance line. The previous breakout was small and thus it required a confirmation. It never got one, and instead gold plunged, invalidating the move. This is yet another sell sign that we saw.

It also serves as further proof that ever since the beginning of the year, gold permabulls (many people continue to claim that gold can only go up, even now) were destroying value rather than creating it. On a side note, we have nothing against checking out the work of other analysts, but we encourage you to check if someone was both bullish and bearish on a given market. If they never changed their mind, it seems that you can save some time by not reading what they come up with, as you already know the outcome. Besides, it’s not like they would prepare you in advance for any decline (in case of permabulls).

Getting back to the current market situation – since gold moved lower quite visibly yesterday (Mar. 30), and even (almost) reached its early-March high, it might be tempting to think that the decline is over. This seems unlikely in my opinion.

The less important reason for the above is visible right on the above chart. Earlier this month, gold-topped very close to its triangle-vertex-based reversal. The previous two triangle-vertex-based reversals also triggered declines. So, if something similar triggered similar moves, then it might be worth checking how big did the previous declines end up being.

Both previous 2021 declines were followed by quite visible declines. The one that started in early Jan. took gold over $130 lower, and the one that started in mid-Feb. took gold over $170 lower. The current decline started at $1,754.20, so if the history is to rhyme (as it often does), gold would be likely to decline to at least $1,584 - $1,624. This target area corresponds quite well to the support provided by the early Mar. and early Apr. 2020 lows.

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