Failed Bull Pattern is Bearish

The decisive breakdown from a consolidation top puts the near-term bull trend in gold at risk of a deeper correction. Unless there is a relatively quick recovery it looks like gold is heading next towards the higher swing low of $3,247 from late-June. If that fails as support, the higher swing low at $3,121 becomes a potential target.

Since the initial pullback from the April record high of $3,500 completed a 38.2% Fibonacci retracement before another advance began, there is a good chance a deeper retracement may be completed in the current correction, given today’s bearish price action. A 50% retracement will be completed at $3,041 and a 61.8% Fibonacci retracement is at $2,933.

Downside Targets

Given the clear failure of the 50-Day MA as support for today, the 200-Day MA, now at $3,000, becomes a potential downside target. Since it is rising it will eventually converge and surpass the 50% retracement area. There is also a falling ABCD pattern that has been added to the chart to help assess potential lower targets. It shows an initial downside target of $3,072, a little below the last retracement low (B) and near the 50% level. That is where the decline in price for the falling CD leg matches the decline in the first AB downswing. Once that happens, a potential pivot level is identified.

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