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Gold’s Potential Reversal: A Second Test of Lows Before a Bullish Surge?
Gold's downtrend continues, but a break above crucial levels could signal a change in momentum.
Today, gold bounced after pulling back to the 78.6% Fibonacci retracement line. 1,903 was the day's lowest point. Prior to gold's readiness to reversal upward and then experience prolonged strength, today may mark the end of a second test of recent lows as support. At 1,897 and 1,893, respectively, the 200-Day EMA and prior trend low provide support.
Downtrend is still present
The precious metal is below the 34-Day EMA and has been in a strong downtrend since its peak on May 4. Along with a string of weekly falls, there are a number of lower swing lows and lower swing highs. Yesterday, gold gained about 2 points above the previous week's high in a bid to break out above it, but it failed. Additionally, it briefly rose above the downtrend line. Thursday saw a spike in selling, and today gold finished a 78.6% retracement.
For a bullish signal, a rally over last week's 1,933 is required.
A rally over the 1,933 high from the previous week sends a bullish weekly signal. A daily close will be required to validate the strength of the breakout, particularly in light of the abrupt reversal that followed a break above that high yesterday. A positive turn in the price of gold should be verified whenever the daily closing rises above 1,933. However, additional indications of strength will be required before indications of strengthening.
Watch for a daily close over the 34-Day EMA, now at 1,940, with a daily closure above last week's high to confirm strength. Midway through May, Gold retreated below the 34-Day line, attempted to ascend above it in June, failed to do so this week, and turned back down.
The pivot level by Monday is this week's high of 1,935
This week's high of 1,935 becomes more significant if gold is unable to surpass last week's high before the end of this week. Next week, rather than using last week's high to affirm strength on the weekly time frame, a daily close above this week's high will be required. A move above previous week's high will be a sign of strength, but this week's high will be more valuable because it soared above last week's high.
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