Gold on the D1 time-frame was in an extended uptrend until May 18 when a higher top was recorded at 1765.08. Supply pressure increased after that level and the market started moving lower.
After the higher top at 1765.08, the market made a lower top and in the process, the price broke through the 15 and 34 Simple Moving Averages with the Momentum Oscillator crossing into negative terrain as it pierced through the zero baseline. The fact that the market made a lower top and then proceeded to go below the previous bottom has initiated a first impulse wave of a possible new downtrend from a structural point of view.
A critical support level might have started forming on June 5 at 1670.55, as buyers seems to be trying to push Gold higher.
In the event that Gold price breaks through the critical support level at 1670.55, then three possible price targets may be calculated from there. Applying the Fibonacci tool to the bottom of the support level at 1670.55 and dragging it to the previous lower top and resistance level at 1745.08, the following targets may be considered. The first target can be projected at 1624.49 (161 %). The second price target may be predicted at 1549.96 (261.8%) and the third and final target may be expected at 1429.37 (423.6%).
If the resistance level at 1745.08 is broken, the scenario above 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 Daily time-frame will remain bearish.
Written by Theunis Kruger, FX Trainer at FXTM