Gold Rolling Over – What Are the Next Key Support Levels to Watch?
Matt Weller, CFA, CMT September 30, 2019 4:23 PM
As my colleague Matt Simpson noted last week, “the daily trend [in gold] remains bullish above $1480,” but as US traders sit down at their desks for the first day of the trading week, that key support level is at risk of breaking.
Looking at the chart below, gold’s uptrend has lost momentum over the last six weeks, with prices unable to make much progress through the mid-$1500s. Over that period, the yellow metal has gone from putting in higher highs and higher lows to lower highs and lower lows, creating a textbook “head-and-shoulders” pattern. This pattern shows a shift from a bullish to a bearish trend and is often seen at important tops in the market:
Source: TradingView, FOREX.com
Meanwhile, the RSI indicator is in a bearish channel, and the MACD is trending lower below its signal line and about to cross the “0” level. In other words, the secondary indicators are confirming the price reversal, suggesting that bears may be taking the upper hand.
In a mirror image of Matt’s comments last week, the short-term trend has now shifted to bearish as long as gold remains below its head-and-shoulders pattern “neckline” in the $1480-1485 area. To the downside, bears may look to target the Fibonacci retracements of this summer’s rally starting at $1445 (38.2%), $1411 (50%), and $1377 (61.8%), as well as the “measured move” projection of the head-and-shoulders pattern at $1400.
Of course, traders must also consider the fundamental outlook for the yellow metal. With global interest rates still at depressed levels and several geopolitical hotspots still at risk of a significant disruption, bears should be cognizant of the risk of a bullish reversal near these key support levels.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.