Bearish gap, bearish formation and… bearish scenario?
Technical Picture of Gold
Let’s start today’s analysis by quoting the Quick Gold Alert posted on Dec.2, 2024:
(…) in my opinion, as long as there is no successful breakout above $2,690.50 (Friday’s intraday high) or a breakdown under $2,644.10 (Friday’s intraday low) another bigger move is no likely to be seen and short-lived moves in both directions should not surprise us.
Why?
Because the breakout above the upper line of the formation will translate into the closing of the mentioned red gap, which will deprive the bears of an ally and open the way for the bulls to the north (at least to the barrier of $2,700 or even to the Nov.25 peak …).
From today's point of view, we see that the situation developed in accordance with the previous pro-growth scenario, and the bulls reached the target mentioned in the last article earlier this week.
Let's start from the beginning.
After several days inside the purple consolidation, gold bears attacked, which resulted in a very temporary breakdown under the lower line of the formation. As you see on the chart, their opponents quickly came back to the trading floor and invalidated this move on Dec. 6, which translated into a higher Monday's open and pro-bullish gap.
These positive developments triggered further improvement and a successful breakout above the upper border of the formation in the following day.
Thanks to this price action, gold bulls came back above the previously broken barrier of $2,700 and closed Tuesday above it, which resulted in another higher open and a green supportive gap ($2,718.40- $2,721.20) on Wednesday.
This bullish signal encouraged the buyers to push the price even higher, and gold futures achieved the minimum range of upward movement corresponding to the height of the above-mentioned purple consolidation.
In this way, the futures also climbed to the resistance area based on the early Nov. peaks, approaching the upper border of the medium-term orange rising trend channel.
The combination of these technical developments translated into a lower Thursday's open and formed a red pro-declining gap ($2,752.89-$2,756.70), which serves as the nearest resistance.
Although the bulls tried to close it earlier today, they failed, which triggered a reversal and lured their opponents to the trading floor.
How has the recent price action affected the 4-hour chart?
From this perspective, we see that thanks to Tuesday’s price action, gold futures also broke above the upper border of the very short-term blue rising trend channel, which triggered a pro-growth scenario assuming an upward move to around $2,752.50.
Why here?
Because in this area, the size of the upward move corresponds to the height of the mentioned channel (both ranges marked with blue rectangles).
Additionally, thanks to this increase, the futures climbed slightly above the 78.6% Fibonacci retracement, which corresponded to the fourth resistance area (marked with the red ellipse with 4), which was strong enough to stop the bulls on Nov.25.
What can we expect next?
Taking all the above into account and combining it with the current position of the 4-hour indicators, it seems that the correction of the recent increases may be just around the corner.
If this is the case and the bears show their claws, we’ll likely see a test of the strength of yesterday’s green gap (marked on the daily chart) in the very near future (the first downside target for the sellers). In my opinion, the result of the battle fought here will decide where the further head next.
Summing up, gold futures extended gains and reached the upside targets from the previous week, which, together with the current position of the 4-hour indicators, suggests that correction of the recent increases and at least a test of the strength of yesterday’s green gap may be just around the corner.
Have a profitable day and see you tomorrow.
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Anna Radomska