Gold Breaks Triangle and Signals Bearish Continuation

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Gold Breaks Triangle and Signals Bearish Continuation

Gold price has been consolidating since reaching a new low on the year at 1130 at the end of last week. As we can see in the 4H chart, price has rallied to 1178.75 and retreated, eventually forming a triangle throughout this week.

Gold (XAU/USD) 11/14 4H Chart 
gold 4h chart 11/14
(click to enlarge)

When we look at the 4H chart, the technical conditions are still bearish.
1) The 200-, 100-, and 50-period SMAs are sloping down and in bearish alignment.
2) Price is holding below the noted SMAs.
3) The 4H RSI held below 60 for the most part, showing maintenance of the bearish momentum.
4) Finally, price action is starting to move below the triangle consolidation pattern, signaling bearish continuation.

Bearish Continuation Scenario: At this point, if price can hold below 1160, gold is poised to fall toward the 1140 then 1130 lows on the year, with risk of breaking lower because the prevailing trend is bearish, and gold has recently broken below a 2013-2014 consolidation support at 1180 to open up another medium-term bearish outlook. The consolidation so far in November is also showing respect to the 1180 area as resistance, adding to the case of a bearish continuation scenario.

Room to Fall: A technical assessment of gold in the weekly chart suggests that the bearish outlook has some room to run.

Gold (XAU/USD) Weekly Chart 
gold weekly chart 11/14

(click to enlarge)

Bearish Conditions: First of all, we can see that the moving averages have re-aligned to a bearish mode since retreating from the 2011 and all-time high near 1920. Price is also now holding below these SMAs. Furthermore, the RSI has tagged 30 and below, and has since held below 60 for the most part, reflecting development of bearish momentum.

Support Levels: After breaking below 1180, gold opened up a bearish outlook for the upcoming weeks to months. In terms of price level, we can expected some support at:
1) 1100 psychological level.
2) 1040-1050 area, which involves the 2010-lows.
3) 985-1000 area which involves the 2008-2009 resistance and the 1000 psychological level.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.