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Gold Prices Fall Through Support: Is the Bullish Trend Breaking Down?

Gold Prices Fall Through Support: Is the Bullish Trend Breaking Down?

James Stanley, Senior Strategist

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In our last article, we looked at Gold prices as they were adhering to an aggressively bullish channel, connecting from the lows in December to account for an approximate 8.6% bump in a little over a month’s time. But to put this move in proper scope, this bullish run was fresh on the heels of a bearish drive that started on the night of the U.S. Presidential Election that spanned more than -16% in a little over a month.

As we had written in our last article, the 50% retracement of that post-Election move sits at $1,230.07; and should price action break-above this zone, then the prior bearish trend would be nullified. This hasn’t happened, and instead, that bullish trend has appeared to have begun breaking down after a false top-side breakout yesterday; falling through a widely-watched zone of support from $1,200.51 up to $1,204.76.

Gold Prices Fall Through Support: Is the Bullish Trend Breaking Down?

Chart prepared by James Stanley

For those looking to implement bearish approaches, caution should be warranted as Gold has become even more volatile than usual after the election of Donald Trump as President of the United States. Next week will likely keep USD volatile with both the Federal Reserve and Non-Farm Payrolls on deck and this, of course, can hit Gold prices.

For those looking to trade Gold prices lower, waiting for a deeper break of support could signal that bears may be able to actually continue driving price action with the aim of continuation of the ‘bigger picture’ down-trend. An aggressive swing-low showed up at $1,187.50 just three weeks ago, and this can be a novel area to look for indications of bearish continuation. But once that support level breaks – traders are likely going to want to wait for resistance to show before triggering short, and the area of prior support from $1,200-$1,204.76 could be an opportune area to stage such an approach.

Gold Prices Fall Through Support: Is the Bullish Trend Breaking Down?

Chart prepared by James Stanley

--- Written by James Stanley, Strategist for DailyFX.com

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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