Gold forms bearish consolidation pattern
James Chen June 6, 2013 8:53 PM
<p>Gold (daily chart) has formed a rising wedge consolidation pattern within an overall bearish trend. This chart pattern hints at a potential impending breakdown which […]</p>
Gold (daily chart) has formed a rising wedge consolidation pattern within an overall bearish trend. This chart pattern hints at a potential impending breakdown which could continue the downtrend that has prevailed since the highs around 1800 eight months ago.
During the course of this downtrend, a sharp decline within the span of just a few days in mid-April dropped the price down to a long-term low of 1321. After this swift plunge, gold corrected back up in late April and early May to a high of around 1487, which coincided with the 61.8% Fibonacci retracement of the sharp decline. After this rise to the major Fibonacci level, the price fell once again to form the current wedge consolidation pattern that has respected key resistance to the upside around 1425, which is also the 38.2% Fibonacci retracement of the sharp decline.
Provided gold is able to stay below this 1425 resistance level, the key price event to watch for would be a significant break below the rising support line of the wedge consolidation pattern. In the event of this breakdown, major price objectives to the downside include a retest of the 1320-area low, and then further down towards bearish targets around 1265 and 1160.
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.