Gold Weekly – Bearish momentum on the rise

Theunis Kruger

The Gold market on the Weekly time frame was in an extended uptrend until the 2nd of August 2020 recording a higher top at 2074.87. That was followed by bearish pressure that upset the bulls, thus moving the market lower.

After the higher top (at 2074.87), the market broke through the 15 and 34 Simple Moving Averages and the Momentum Oscillator crossed into negative terrain as it pierced through the zero baseline. Both technical indicators and the market structure of lower tops and a lower bottom confirmed that the bears exercised enough pressure to start a new downward trend.

A possible critical support level formed on the 29th of November 2020 at 1764.53, after which the bulls started pushing back. They failed near a resistance level at 1959.39 on the 3rd of January 2021 and the bears took back control of the market.

It is important to note that although the downward trend is confirmed from a structural point of view (consecutively lower tops and bottoms), how far it might continue is always unsure, so risk management is essential.

If gold breaks through the critical support level at 1764.53 and makes another lower bottom, three possible price targets may be calculated from there. Applying the Fibonacci tool to the bottom of the support level at 1764.53 and dragging it to the resistance level at 1959.39, the following targets may be considered. The first target can be projected at 1644.11 (161 %). The second price target may be foreseen at 1449.25 (261.8%) and the third may be expected at 1133.96 (423.6%).

If the resistance level at 1959.39 is broken, the above scenarios are annulled, and appropriate action must be taken.

As long as sellers maintain a negative sentiment and supply keeps overwhelming demand, the outlook for the Gold Market on the Weekly timeframe will remain bearish.

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Theunis Kruger

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