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Gold’s Consolidation Battle: Will It Break the Uptrend or Fall into Bearish Territory?
The gold market is engaged in a struggle as it tries to break the long-term uptrend or give in to more adverse pressure. The answer is in the 100-Day EMA.
As today's price movement is largely restricted inside the trading range from Wednesday, gold remains trapped inside consolidation. With a daily high of 1,970, resistance around the 34-Day EMA was once more tested today, while support around the 100-Day EMA was challenged with a low of 1,940. Therefore, for a bullish or bearish signal, respectively, gold must break through either the 34-Day line (now at 1,972) or the 100-Day line (currently at 1,938).
Recent Price Movement Leads to Uncertainty
Most of the recent price movement has taken place below the long-term uptrend line, which is currently acting as resistance. Keep in mind how the higher daily highs line up under the line in a series. This is pricing behavior that is bearish on its own. But given that the 100-Day EMA, the other long-term trend indicator, is close by, Gold Has a Relationship with the 100-Day EMA.
The fact that the market has been able to clearly identify the relationship between gold and the 100-Day EMA since the November bottom is important (1). Prior to November, gold had been trading below the 100-Day mark for more than six months. In November, it broke above it, immediately tested it as support, and then soared higher. At the start of February, the 1,960 peak was hit, causing a correction.
The price of that correction twice fell beneath the 100-Day line, which served as support, forming a double bottom that signaled a bullish breakout on March 10. At the trend's bottom and close to the 100-Day EMA, a consolidation pattern is also developing, but this time it is developing at the line's support rather than below it.
Continued Bear Trend Below 1,932
The bear trend will continue if prices fall below the 1,932 level that serves as the current trend low. When a descending ABCD pattern is finished, the next lower objective would be 1,925. The 61.8% Fibonacci retracement is located at 1,912 and is lower yet. If gold does drop to a new trend low, the amount of time it spends there and the amount of time it takes to rise back above the trendline and 100-Day line will provide traders a hint as to what might come next.
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